Compromise? Looking at the Debt Deal

By Todd Shaw

OCPA Intern

The various public reactions to Obama & Boehner’s recent debt ceiling fix come as no surprise. Despite no program or agency terminations being identified, critics brood over a deal that will allegedly cut entitlement programs and higher-education subsidies. In addition, assorted media continue to fulfill their role as sentinels for Washington, lauding the “historic” deal that will “cut” and “slash” federal spending by over $2 trillion in ten years.

But as Chris Edwards of the Cato Institute indicates, federal spending won’t be cut at all:

Spending isn’t being cut at all.  The “cuts” in the deal are only cuts from the [Congressional Budget Office] “baseline,” which is a Washington construct of ever-rising spending. And even these “cuts” from the baseline include $156 billion of interest savings, which are imaginary because the underlying cuts are imaginary.

As Boehner commends a deal that cuts discretionary spending (government spending via appropriation) by $917 billion over 10 years, he seems to have looked past an important figure. The actual discretionary spending cap will rise by $191 billion within the next decade, at an average increase of $21.2 billion/year. Despite a sizable discretionary cap of $1,234 billion by 2021, the restrictions won’t apply to “program integrity initiatives,” “overseas contingency operations,” and other federal programs (see the Director of the CBO’s comments here). Congressional approval of these new bipartisan discretionary spending benchmarks will result in a net result that will increase discretionary spending.

It seems as though the journalists, pundits, and politicians have also missed the $1 trillion of new deficits that will materialize next year alone. As Washington calls the deal a compromise, supporters of free markets and limited government will continue to see resources shift from the private sector to the public sector. This week’s deal distorts the reality that the state will continue to extend itself well into the private sphere.