A Teeny Tiny Budget Cut
Kurt Brouwer May 12th, 2009
The $3.4 trillion (some say $3.5 trillion) Federal budget is out for all to see. As part of the budget, the White House announced some really big cuts on the order of $17 billion. That’s right, $17 billion. Now, in most places, $17 billion would be a giant sum. However, in Washington DC it’s a rather trivial number as even the Washington Post noted [emphasis added]:
Obama’s Budget Knife Yields Modest Trims (Washington Post, May 7, 2009, Lori Montgomery & Amy Goldstein)
President Obama has said for weeks that his staff is scouring the federal budget, “line by line,” for savings. Today, they will release the results: a plan to trim 121 programs by $17 billion, a tiny fraction of next year’s $3.4 trillion budget.
…”Even if you got all of those things, it would be saving pennies, not dollars. And you’re not going to begin to get all of them,” said Isabel Sawhill, a Brookings Institution economist who waged her own battles with Congress as a senior official in the Clinton White House budget office. “This is a good government exercise without much prospect of putting a significant dent in spending.”
Administration officials defended their approach, saying the list of program reductions and terminations is just the start of a broader effort to cut spending and rein in a skyrocketing budget deficit, which is projected to approach $1.7 trillion this year. They also noted that the list does not include more than $300 billion in savings Obama proposes to squeeze from federal health programs and use to finance an expansion of coverage for the uninsured…
This last sentence cracked me up. The anonymous administration officials mentioned — and presumably they thought this was a favorable point — that this list of illusory cuts did not include potential savings of $300 billion. So far, so good. Except in the very same thought, they mentioned that those savings — if realized — would be deployed elsewhere, so they would not be a budget cut at all. D’uh.
…The proposed cuts, if adopted by Congress, would not actually reduce government spending. Obama’s budget would increase overall spending; any savings from the program terminations and reductions would be shifted to the president’s priorities.
But the more likely outcome, budget analysts said, is that few to none of the programs targeted by Obama will be terminated. Presidents from both parties have routinely rolled out long lists of spending cuts — and lawmakers from both parties routinely ignore them.
…”Obviously, the bottom line is frightening,” said Rudolph Penner, a senior fellow at the Urban Institute and a former director of the Congressional Budget Office. “They have a long way to go to show fiscal restraint.”
In other words, these teeny, tiny cuts won’t get enacted at all. The ironic part is that cuts of this magnitude — approximately 0.5% — are almost irrelevant. Take for example a family with spending of $50,000 per year. In order to show some fiscal restraint, it has decided that it may cut as much as $250. If that does not impress you, then don’t take the proposed cuts of $17 billion too seriously.
Update: The White House press release had barely gotten out before Congress began to howl about these manifestly unfair cuts. This Washington Post piece makes the point:
President Obama’s modest proposal to slice $17 billion from 121 government programs quickly ran into a buzz saw of opposition on Capitol Hill yesterday, as an array of Democratic lawmakers vowed to fight White House efforts to deprive their favorite initiatives of federal funds…
So much for even a one half percent budget cut.
- Economy , Geopolitics , debt , income taxes , inflation
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