04/12/2011 04:27 pm ET | Updated Jun 12, 2011

Shutdown-Averting Budget Deal Is Not Very Serious In Terms Of Deficit Reduction

Last week's near shutdown of the government occurred because we were supposedly having an intensely "serious" discussion about reducing the federal deficit. But when you look at both the components of the deal that were agreed to, as well as some of the matters that were on the table, it's hard to take these claims of seriousness very seriously.

As you already know, a lot of the eleventh hour debate concerned Planned Parenthood -- an issue that related more to pure partisan antipathy than to a serious attempt to save taxpayers money. That's not it, though. There's a slew of things in the deal, or in the discussion of it, that just have nothing to do with cutting the deficit. In fact, there's a fair amount of things that would actually add to the deficit.

Below are eight prime examples, including a note on whether they made it into the final agreement or not.

1. Budget Gimmicks Galore!

The $38 billion in cuts is already being reported as the largest single deficit reduction measure in history. But as the Associated Press reports today, both sides of the negotiating table indulged in a slew of budget tricks to arrive at that top line figure:

The details of the agreement reached late Friday night just ahead of a deadline for a partial government shutdown reveal a lot of one-time savings and cuts that officially "score" as cuts to pay for spending elsewhere, but often have little to no actual impact on the deficit.

As a result of the legerdemain, Obama was able to reverse many of the cuts passed by House Republicans in February when the chamber approved a bill slashing this year's budget by more than $60 billion. In doing so, the White House protected favorites like the Head Start early learning program, while maintaining the maximum Pell grant of $5,550 and funding for Obama's "Race to the Top" initiative that provides grants to better-performing schools.

Instead, the cuts that actually will make it into law are far tamer, including cuts to earmarks, unspent census money, leftover federal construction funding, and $2.5 billion from the most recent renewal of highway programs that can't be spent because of restrictions set by other legislation. Another $3.5 billion comes from unused spending authority from a program providing health care to children of lower-income families.


About $10 billion of the cuts comes from targeting appropriations accounts previously used by lawmakers for so-called earmarks, those pet projects like highways, water projects, community development grants and new equipment for police and fire departments. Republicans had already engineered a ban on earmarks when taking back the House this year.

Republicans also claimed $5 billion in savings by capping payments from a fund awarding compensation to crime victims. Under an arcane bookkeeping rule -- used for years by appropriators -- placing a cap on spending from the Justice Department crime victims fund allows lawmakers to claim the entire contents of the fund as budget savings. The savings are awarded year after year.

STATUS: These tricks are part of how the deal's top-line figure was achieved.

2. Reduced IRS Enforcement

Everyone hates the taxman -- the GOP's Tea Party base, especially so. But in cutting a proposed increase in the budget for Internal Revenue Service enforcement, Republicans who pushed for the reduction were essentially calling for a straight up loss in revenue:

On March 1, House Republicans voted to cut $600 million from the budget of the Internal Revenue Service for the remainder of 2011, and they want even deeper cuts in 2012. Perhaps that doesn't surprise you: Republicans don't like spending -- at least when they're not in power -- and they don't like taxes. Why would they fund the IRS?

Well, as the Associated Press reported, "every dollar the Internal Revenue Service spends for audits, liens and seizing property from tax cheats brings in more than $10, a rate of return so good the Obama administration wants to boost the agency's budget." It's an easy way to reduce the deficit: You don't have to cut heating oil for the poor or Pell grants for students. You just have to make people pay what they owe.

I thought everyone wanted to eliminate waste, fraud and abuse. Tax scofflaws are apparently not part of that equation. And the people who are primarily cheated by tax evaders are, of course, everyone who pays their fare share.

STATUS: The current agreement froze funding for the IRS.

3. No "Free Choice" in Obamacare

Sen. Ron Wyden (D-Ore.) has been doing a lot of unheralded work in taking the good faith opposition to the president's Affordable Care Act and crafting some compromise measures that might preserve the bill and enhance its standing with the GOP. One such provision is his Free Choice Voucher, which he described as a "foothold for choice and competition and a safety valve for Americans whose employers are already forcing them to bear more and more of their family's health insurance costs."

As part of the appropriations deal, the vouchers were unceremoniously killed off. As Matt Yglesias notes: "We don't really know who killed it, but it doesn't have any meaningful budgetary impact so it's not like this was a concession made in order to reach some target cut figure."

This move has nothing at all to do with budgetary concerns, it's just straight up hate for the Affordable Care Act. Ron Wyden has more here.

STATUS: Killed off.

4. A Bailout For For-Profit Colleges

The Department of Education has a "gainful employment" rule that precludes student loan and Pell Grant dollars going to programs that don't help students succeed. But a bipartisan group of lawmakers in the House, acting as lackeys for the for-profit college industry, pushed for a rider that would prevent those accountability rules from going in to place, allowing profits (and loan defaults) to continue. HuffPost's Chris Kirkham explains:

Gainful employment rules would apply to career-focused programs at both for-profit and non-profit colleges, but the for-profit college industry has mounted an unprecedented lobbying campaign against the regulations. As drafted, the rules would track students after they leave college and evaluate them in two ways: whether they are paying down the principal on their student loans and whether they have attained an income that allows them to manage debts.

Far from sweeping, a draft version of the regulations would allow degree programs for-profit colleges and other vocational schools to remain fully eligible for federal aid money even if less than half of their students are repaying the principal on their loans. Some could remain eligible even if only a third of students are in repayment. Programs that fail to meet certain requirements could lose access to federal student loan and grant money -- crucial revenues for the for-profit sector.

And a crucial drain on government revenues.

STATUS: Good news: "The final deal will not include a measure that would have prevented the Obama administration from cracking down on certain schools," Kirkham reports.

5. Less Money for the NIH

The budget battle included a proposal that would enact $1.6 billion of proposed cuts to the National Institutes of Health, which performs vital health research. As Choire Sicha points out: "It turns out that when legislators actually know what the NIH does, they want to give it more money, not less." What's more, the federal investment in the NIH offers a staggeringly high rate of return:

The federal government, mainly through the NIH, funds about 36 percent of all biomedical research in the United States. Nonprofit organizations fund about 7 percent, and private industry funds about 57 percent.


The economy-wide rate of return on publicly funded research [is] on the order of 25 to 40 percent a year. This finding agrees with estimates of the rate of return of privately funded research and development. By way of comparison, the average before-tax profits of nonfinancial corporations in the United States ranged from 8.5 percent to 14.3 percent in the most recent ten years for which data are available (1988 to 1997), and corporations often use an expected rate of return of 15 percent as the minimum for considering investments.

STATUS: In the final agreement, the $1.6 billion figure was reduced to $260 million.

6. Defunding Obamacare

One of the things that Obama's Affordable Care Act does is furnish grants that fund medical research -- research that spurs cost-cutting medical innovations. Let's consider one example, via Rick Ungar at Forbes:

For 50 years now, dialysis patients have had a plastic stent inserted under the skin as part of the process required to 'hook them up' to the dialysis machine. Once the little tube is in place, blood flows through the stent 24/7 - even though the average kidney patient experiences dialysis roughly ten hours a week.

This little tube is the source of some very big problems. Because the blood flows constantly through the alien device, patients experience all sorts of trouble including clot formations, gangrene, finger ulcers and circulation impairment.

As a result, the typical kidney patient is forced to undergo 10 to 12 operations over their lifetime in response to these complications. In fact, over 1 million of these procedures are performed each and every year.

And who do you think pays for this?

We do. You see, dialysis is one of the very few conditions that Medicare pays for regardless of your age. As a result, every patient in America who requires the procedure is entitled to payment from the government up to a maximum of $75,000 a year with $15,000 of that money typically spent on the surgeries to deal with the complications resulting from that little tube.

As the article goes on to relate, a South Carolina vascular surgeon named Steven Cull came up with an idea: "A valve that would close off the blood flow through the tube except for when the patient is undergoing the dialysis treatment," as Ungar describes it.

The potential upside? "Should the valve work, it would effectively end the complications that are costing the Medicare program $15 billion a year," he writes. Go read the whole thing to get the full story of how Cull had to battle his way around Tea Party hero Jim DeMint, the junior Sen. from S.C., to finally secure funding under the Affordable Care Act.

The bottom line is that defunding the implementation of these sorts of grant programs keeps deficits unnecessarily high.

STATUS: As part of the agreement, GOP legislators will be allowed to hold a separate vote on defunding the Affordable Care Act.

7. Climate Change Contrarianism

A lot of the GOP's war on the environment didn't make it into the final deal: policy riders that would restrict various environmental regulations were dropped, and Republicans budged somewhat on the cuts they wanted to impose on the Environmental Protection Agency ($1.6 billion, down from $3 billion). But they continue to deny the existence of climate change, and cuts reflecting that belief made it into the bill. Per The Hill:

The bill cuts funding for climate change-related programs by $49 million when compared to enacted fiscal 2010 levels. This includes blocking funding for the National Oceanic and Atmospheric Administration's [NOAA] climate service and eliminating President Obama's energy and climate change adviser, or "climate czar." Carol Browner, who previously held the position, has left the White House.

The upshot? Over the long run, this could cost the government a lot of money. As Christine W. McEntee warned before the budget deal, these cuts "will limit access to a wide array of scientific data and information about climate, extreme weather events and seasonal forecasting, including the ability to leverage international knowledge and research, all of which could help inform mitigation and adaptation strategies worldwide." Here are a few of the items potentially affected by the budget deal:

  • Without satellite data provided by NOAA, precipitation rate predictions in the southern U.S. could be off by as much as 50 percent. For the February 6, 2010 storm that paralyzed DC and the Mid-Atlantic coast ("Snowmaggedon"), the snow would have been under-forecast by at least 10 inches.


  • Polar satellites provide weather forecasting for the $700 billion maritime commerce sector and provide a value of hundreds of millions of dollars for the fishing industry. The satellites save some $200 million per year for the aviation industry in volcanic ash forecasting alone and provide drought forecasts worth $6-8 billion to farming, transportation, tourism and energy sectors.

Economic vitality, national security, public health and environmental sustainability all depend on making the best use of science in formulating public policy, including climate science. If political pressure squelches scientific research, climate change will not magically disappear, but the objective knowledge needed to inform good decisions will.

STATUS: These climate research funding reductions are part of the agreed-to deal.

8. Cuts To Sexually Transmitted Disease Prevention Programs

As a part of the final deal, HIV/AIDS, viral hepatitis, and STD prevention takes a $1.1 billion hit. That's too bad because, as the Centers for Disease Control and Prevention writes, this has long been shown to have a high rate of return for the investment:

Three CDC studies show how federally-funded efforts to prevent sexually transmitted diseases (STDs) have dramatically reduced STDs and their associated health costs.

The first study provided evidence that funding for STD and HIV prevention has a discernable impact on new cases of STDs. The authors found that greater amounts of federal STD and HIV prevention funding in a given year are associated with reductions in reported gonorrhea rates at the state level in following years. Results suggest that each dollar of prevention funding (per capita) is associated with a later decrease in gonorrhea of up to 20 percent. Because gonorrhea is a marker for risky sexual behavior, the findings are likely generalizable to other STDs, including HIV.

The second study examined the impact of federally-funded STD prevention efforts over the past 33 years, estimating that approximately 32 million cases of gonorrhea were avoided from 1971 to 2003 as a result of prevention efforts. The study demonstrated that STD prevention programs paid for themselves. Savings realized by preventing gonorrhea exceeded the STD prevention program expenditures by more than $3.7 billion during the 33-year period. If other benefits were considered (such as the prevention of other STDs), the estimated effectiveness and cost-effectiveness of STD prevention in the United States would be even greater.

In the third study, researchers estimated that reductions in new cases of gonorrhea and syphilis from 1990 to 2003 saved $5.0 billion in direct medical costs. This estimate was based on reported cases of the two diseases in the United States, coupled with published estimates of direct medical costs per STD case. Authors calculated that the total direct medical cost of gonorrhea and syphilis was $3.8 billion over the 14-year period, compared to $8.9 billion if STD rates had remained at their 1990 levels. Because gonorrhea and syphilis infection are known to increase the risk of HIV transmission, a significant portion ($3.9 billion) of the total savings ($5.0 billion) reflected HIV infections that were averted due to reduced gonorrhea and syphilis rates.

STATUS: Cut in the negotiated deal.

The list could go on to include $78 million cut from research on health costs, quality and outcomes or $9 million taken from the Department of Energy Inspector General's office. The Energy Innovation Fund, Energy Efficiency Grants, and Green Jobs Innovation Fund are also being slashed. None of these moves exactly scream, "This has potential to pay off handsomely for taxpayers or contribute mightily to deficit reduction."

But these sorts of measures -- ones that fail to impact the overall budget picture or, worse, threaten to spur deficit increases -- seem be hardwired into the deal, not bugs. All this was supposed to be part of a serious discussion to reduce the national debt? Could have fooled me!

Ryan Grim, Corbin Hiar, and Nick Wing contributed to this report.

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