Starting from the Right Place

Yesterday in a hearing before the Senate Budget Committee, some Republican members made the charge that the President’s budget does not cut spending at all, but actually increases it by $1.5 trillion.

As Acting Director Zients made clear in his testimony and as we have been saying repeatedly these past few days, the President’s Budget cuts the deficit by more than $4 trillion over the next 10 years – and more than two-thirds of this deficit reduction comes from spending cuts.

So, what is going on here?

The difference comes down to the fair starting point:

• First, the Republican members are not counting the about $1 trillion in savings produced by the spending caps in the Budget Control Act, signed into law by the President in August.  That’s moving the chains. Spending and deficit reduction negotiations began last year, and the Administration has been consistent in measuring deficit reduction from the beginning from that point.  In accounting for how much the President is proposing to reduce spending, it is only right to include the spending caps that are now signed into law.  This Budget makes the tough choices needed to meet these targets. 
• Second, the Republican members are counting as a spending increase the fact that the President’s Budget turns off the sequester under the Budget Control Act and replaces it with balanced deficit reduction.  However, the sequester was meant as a forcing mechanism—everyone, including most Republicans, agree that it was never meant to be actual policy.  It’s only fair to give credit to those putting forward real deficit reduction to replace the sequester. 
  Moreover, however you count it, there is a large spending cut from the start of last year.  If you count the sequester under the Budget Control Act, as the Republicans want to, that means that bill contained more than $2 trillion in spending cuts for which we should be given credit.  And, if you don’t credit the sequester to the Budget Control Act, then we are proposing more spending reductions now—but the total from the start of last year remains the same. 
• Third, the Republicans are insisting that spending should be measured from a current law baseline that is not an accurate reflection of reality.  By contrast, we believe the right place to measure is from the current policies now in place.  Under the Republican current law baseline, the rate at which Medicare reimburses doctors would be cut dramatically even though year after year Congress passes a law to prevent this from happening; the Alternative Minimum Tax (AMT) would be left to hit more than 30 million families, many of them middle class, something that also Congress has not and should not allow to happen; and the 2001 and 2003 middle class tax cuts would entirely expire. 

To take one of these as an example—the Republicans count as a spending increase proposed by this President the interest cost of fixing the AMT and extending the 2001 and 2003 tax cuts, which is more than $600 billion.  Given that represents current policy—and a policy on which Republicans and Democrats agree—that should not be counted as a spending increase proposed by the Administration.

Finally, it is true that there are some instances where the President has chosen to make investments.  Most notably, this budget includes over $150 billion for short-term jobs measures that will help to get people back to work while rebuilding this country.  While some in Congress will attack this as new spending, the President has been clear that he will do whatever is necessary to support short term economic recovery.  And, the size of the spending cuts that this President has proposed and signed into law far exceed these additional measures.

Heather Higginbottom is Deputy Director of the Office of Management and Budget