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July 27, 2011
 

According to CBO, the Reid Plan Includes $1 Trillion in Phantom Savings and a Debt Limit Increase that is $1.6 Trillion Larger than Cuts

 

The following summary of the Reid debt ceiling increase legislation is based on an estimate made by the Congressional Budget Office (CBO), which was released on July 27, 2011.

Debt Limit Increase Significantly Larger Than Cuts:  According to CBO, the Reid plan would increase the debt limit by $2.7 trillion, from $14.294 trillion to $16.994 trillion.  However, CBO also states that the bill—even if you include the $1 trillion in imaginary war savings—would only reduce spending by $2.176 trillion over ten years, meaning the debt limit increase would be $524 billion beyond even the most generously calculated spending cuts in the bill.  If you exclude phantom war savings, the bill reduces spending by $1.13 billion, which is nearly $1.6 trillion less than the debt limit increase.

$1 Trillion in Phantom Spending Cuts:  The Reid plan contains more than $1 trillion in imaginary “savings” from war spending that is not written into law, has never been requested, and no one plans to ever spend.  According to CBO, the Reid plan would set caps on spending for the wars in Iraq and Afghanistan over the next ten years, which would have the impact of reducing CBO’s baseline for war spending by $1 trillion over the next ten years—but would actually cut zero dollars of real spending.  According to their estimating practices, CBO automatically assumes that we will continue to spend at least $159 billion annually (the amount spent for 2011) on war operations for the next ten years even though the amount has neither been requested nor written into law.  It is widely known that the cost of the ongoing wars in Iraq and Afghanistan will be significantly reduced in coming years, but CBO’s mandate forces it to assume $1.6 trillion in war spending over the next decade.  By contrast, the budget submitted by President Obama assumes that spending on the wars will total $575 billion over ten years.  Reid’s plan caps war spending at $545 billion—fundamentally the same amount as the president’s budget already estimates—and calls it a savings of $1 trillion.  The Reid plan simply reduces a make-believe war spending baseline that will never be reached, and pockets the “savings” from imaginary outlays to the tune of $1trillion.  The House Republican Budget Control Act of 2011 would provide real cuts to reduce spending by an amount greater than the debt limit increase without relying on budget gimmicks.

Discretionary Spending:  According to CBO, the Reid plan would impose discretionary spending caps starting at $1.045 trillion in 2012 and reaching $1.228 trillion in 2021.  CBO estimates that these caps would reduce discretionary spending by approximately $750 billion over ten years.

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Bohner, Ryan and Cantor use the same phantom math

 

In a remarkable interview on CNBC, Majority Leader Eric Cantor admitted to Larry Kudlow that both the House Republican budget and the “Cut, Cap, and Balance” Plan — which were both supported by nearly the entire GOP caucus — also counted savings from winding down the wars:

Cantor: Speaker Boehner came out months ago and said we are not going to increase the debt ceiling unless we have comensurate or even greater cuts in spending. Now Sen. Reid’s plan doesn’t do that. What Sen. Reid’s plan says is we’re going to raise the debt ceiling $2.4 trillion and we are also going to cut spending but what he does is counts over a trillion dollars in spending that is assumed to decrease and go away anyway which is the spending associated with the wars in Iraq and Afghanistan.


Kudlow: Yes, but isn’t that in the Paul Ryan baseline also, which is the baseline for Cut, Cap and Balance.

 

Cantor: But, but, but… absolutely it is.

When President Obama released his fiscal 2012 budget back in February, House Budget Committee Chairman Paul Ryan (R-WI) criticized the administration for counting “phantom savings” from the wars in Iraq and Afghanistan:

The savings that they’re talking about, they suggest that they’re going to be in Afghanistan and Iraq at current levels for 10 years and then they have a withdrawal that saves $1.1 trillion. So a lot of the savings they’re claiming, I think, are phantom savings.

But as it turns out, Ryan’s budget counts these same “phantom savings” as actual savings:

$1.3 trillion in “savings” from the official CBO baseline that comes merely from the fact that the Ryan plan reflects the costs of current policy in Iraq and Afghanistan. The CBO baseline contains a large anomaly related to the costs of the Iraq and Afghanistan wars. Following the rules governing budget baselines, CBO’s baseline mechanically assumes that current levels of U.S. operations — and costs — in Iraq and Afghanistan will continue forever rather than phasing down.

The Iraq theater is ratcheting down.  Although everyone is supposed to be out by December, that will be impossible.  There is so much materiel over there we can't get it out until April or May of next year.  Even then, Kuwait will look like an army depot with oil rigs.  That's about all most of the land in Kuwait is good for anyway.  

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