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.