Debt Ceiling Negotiations Risk Falling Victim To Budget Gimmicks
WASHINGTON — Negotiators seeking to carve trillions of dollars from the deficit are facing temptation to use iffy assumptions and outright gimmickry to exaggerate the size of spending cuts to accompany any increase in the government's ability to borrow to stay afloat.
With both sides reluctant to abandon long-held positions – Republicans are against tax increases, Democrats oppose cutting benefit programs like Medicare – those watching the talks being led by Vice President Joe Biden are on the lookout for a familiar set of accounting tricks.
Little wonder. Both already have employed such tricks earlier this year in making their budgets appear leaner than they really are.
The most obvious options available to negotiators are to claim inflated savings from troop drawdowns in Iraq and Afghanistan and to have budget savings pile up over 12 years or so rather than the 10 years that is typical when drafting budgets.
And there's every possibility that the negotiations will generate unrealistic assumptions about cuts to domestic agencies and the Pentagon over the coming decade – and the real possibility of a deal that would lack enforcement teeth.
Perhaps the most obvious gimmick would be to claim the ongoing drawdown from the troop surges in Iraq and Afghanistan as budget savings.
Already this year, both President Barack Obama and House Republicans have claimed in their budgets more than $1 trillion in savings by taking advantage of the peculiar way government scorekeepers project war costs and by lowballing projected costs in future years.
Under the rules followed by the Congressional Budget Office, the agency currently projects war spending to grow with inflation even as troop drawdowns are ongoing. That means House Republicans could claim more than $1 trillion in savings by cutting the budget for war costs to $65 billion for 2014 and $50 billion a year shortly thereafter.
In the Republicans' defense, they were simply mimicking Obama's budgeting for the war, which claimed nearly identical – but equally iffy – savings.
Democrats are pushing to employ the gimmick in the Biden-led talks. When asked about the idea Tuesday, a GOP participant in the talks said it would be wrong to claim the savings.
"It's not something that I think you can legitimately claim out of these talks," House Majority Leader Eric Cantor, R-Va., said. "Certainly the savings may be there, but they're not a product of these talks."
Another option is to lengthen the time frame over which any deficit savings accumulate from 10 years to perhaps 12 years. That's the method used when Obama claimed $4 trillion in deficit savings when offering a revised budget plan in April. An additional two years of spending cuts adds a disproportionate amount of savings since the cuts at the tail end of a budget window are invariably far larger than those produced in the early years.
So Obama's $4 trillion in savings over 12 years computes to more like $2.9 trillion over a decade – and it's $2.5 trillion using more conservative CBO estimates.
The $4 trillion figure is noteworthy because it's the amount claimed by Obama's deficit commission – except the savings recommended by the deficit panel accumulated over nine years.
Biden recently said the negotiators were working toward a "real serious down payment on the commitment to four trillion bucks (of deficit cuts) over the next 10 to 12 years." And Sen. Jon Kyl, R-Ariz., also suggested recently that the savings could accrue over a time period of longer than a decade.
Not every budget maneuver is a gimmick that avoids difficult decisions. For instance, a proposal to lower the inflation adjustment for federal benefit programs and income tax brackets to the so-called chained Consumer Price Index is a way to generate up to $300 billion in deficit savings. The chained CPI, economists say, would more accurately reflect consumer behavior when prices rise instead of assuming they buy the same "market basket" of goods and services.
It would raise revenues because it would push more workers into higher tax brackets and it would generate savings from Social Security, federal civilian and military pensions and other benefit programs. Democrats are unlikely to permit the chained CPI to apply to Social Security within the confines of the Biden talks, however.
Another area for potentially inflated claims of cuts involves the Cabinet agency budgets passed by Congress each year. This so-called discretionary spending runs the gamut from education to defense to homeland security programs. The overall cap on such programs is usually set each year by the annual budget passed by Congress.
Even though the budget sets a one-year cap, policymakers invariably make inflated estimates of how much can be saved over five or 10 years, even though they're impossible to enforce and are often simply based on wishful thinking.
Senate Minority Leader Mitch McConnell, R-Ky., an enormously influential figure, is pressing for a two-year cap set in law. But negotiators may forecast future savings based on that cap, even though prior estimates of multiyear caps have invariably proven bullish.
Loading comments… 
ANDREW TAYLOR 06/22/11 12:14 PM ET Associated Press