CBO Says Spending Cuts Aren't As Advertised

The Congressional Budget Office reports that the $38 billion in cuts to the budget for the current fiscal year will actually reduce this year's deficit by only about $352 million. Robert Siegel speaks with NPR's Scott Horsley for more.

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ROBERT SIEGEL, host:

This evening, President Obama signed a spending bill to keep the government operating for the next six months. It's the product of those 11th-hour negotiations with Congress a week ago tonight that averted a government shutdown. When the deal was announced, lawmakers said it would cut spending by 38 and a half billion dollars this year.

But according to the government's own scorekeepers, the short-term savings are a fraction of that - and a really small fraction of that.

NPR's Scott Horsley joins us now to try to make sense of this.

And Scott reminds us that 38-and-a-half-billion-dollar figure was the result of a compromise.

SCOTT HORSLEY: That's right, Robert, and it came after a long period of negotiation.

Remember, the Democrats never passed a budget last year when they controlled the House and the Senate, so we began 2011 with temporary spending authority based on 2010 levels. The Democrats said essentially let's leave it that way. The Republicans said no, let's cut a lot. Sixty-one billion dollars in cuts was their target. They went back and forth. There were a number of stopgap bills passed - each one chipping away.

In the final showdown, there was this tradeoff between spending cuts and policy provisions, and when the dust settled, most of the policy provisions were left out, and in exchange, the Republicans got what they thought was 38 and a half billion dollars in spending cuts.

SIEGEL: Thirty-eight and a half billion dollars. Then at midweek, the Congressional Budget Office came out and said: Hold on. The cuts are not exactly as advertised.

HORSLEY: That's right. They concluded that the savings in this fiscal year, which is already half over, would be - are you ready - $350 million, or a little less than 1 percent of that 38-and-a-half-billion-dollar figure.

Well, as you can imagine, that alarmed some lawmakers, especially Republicans who wanted bigger cuts. They pestered the CBO for an explanation. Yesterday, we got a second report that include the savings over time which the CBO says will be in the 20 to $25 billion range. That's a lot more than 350 million but still short of that top-line figure we were all talking about this time last week.

SIEGEL: Even the difference between the 38.5 billion and 20 to 25 billion, this is not exactly a rounding error...

(Soundbite of laughter)

SIEGEL: ...and we're in a city famed for creative accounting. This is a huge discrepancy that congressmen - Congress is going to have to explain to their constituents.

HORSLEY: That's right. And I'm still trying to figure it out myself.

There are at least two things going on here. Some of the funds that were cut were not going to be spent in these next six months but rather over a period of years. Now, those are real cuts. It's just that the savings don't show up right away. And the CBO says most of that 20 to $25 billion will show up in savings between now and 2016.

Some of the money that had been X'ed out of the budget probably wasn't going to be spent at all. In some cases, it might have been money that was left over from some earlier project that came in under budget or maybe was set aside by a lawmaker for some special cause but never actually got drawn down. This is money that, in the CBO's opinion, wasn't going to be spent. So to the extent those dollars are included, the 38-and-a-half-billion-dollar total was a little bit inflated.

(Soundbite of laughter)

SIEGEL: Yes. How were the people who negotiated these spending cuts -the president and the speaker of the House, John Boehner - how are they reacting to all this?

HORSLEY: Well, of course, it's a bigger challenge for Speaker Boehner. He's the one whose side wanted the biggest cuts possible, and he promised more than once during the debate that he wasn't going to settle for smoke and mirrors or accounting tricks.

He was also struggling before yesterday's vote to hold his caucus together. As it turned out, 59 Republicans in the House voted against this deal.

As he was trying to make the case for a yes vote, Speaker Boehner's reaction to the CBO report was short and to the point.

Representative JOHN BOEHNER (Republican, Ohio; Speaker of the House): A cut is a cut.

HORSLEY: Now, for the White House, it's a lit bit easier. Jay Carney was asked about this yesterday - the White House spokesman. He declined to comment, but the White House has stressed that in negotiating these spending cuts, it was trying to protect its priorities, such as education. That said, I think this is going to breed some cynicism about any efforts to cut spending.

SIEGEL: OK. That's NPR's Scott Horsley at the White House.

Thank you, Scott.

HORSLEY: My pleasure, Robert.

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