The Budget Debarte

When is a spending cut a spending cut? When it is not done by government. When a family cuts spending, it spends less this year than it did last year. When the government cuts spending it reduces the rate at which spending increases. The Congressional Budget Office provides a “baseline projection” which assumes current laws remain in place. Thus, any spending occurring when the CBO makes its projection is likely to rise in coming years. Only if an expenditure is set to retire would spending on that item not increase each year. So if the spending projection is a 5% rise from this to next year, a spending cut would be a reduction from a 5% rise to a 4% rise.
For instance, according to the Investor’s Business Daily (July 22, 2011) the Cut, Cap and Balance plan supported by the House, spends $5.8 billion less over ten years than the CBO baseline. According to the CBO baseline spending will rise from $3.6 trillion in 2012 to $5.6 trillion in 2021. That is a 4.7% average annual rise. With the Cut, Cap and Balance, spending will be $4.7 trillion in 2021. This is a 3% annual rise. Yet, Congress and the President refer to this as a drastic cut; a cut of nearly $1 trillion.
The counterargument is that the baseline projection just keeps government services the same. Yes, they cost more but the actual quality and quantity of the service remains the same. But, a cut should be a cut, not remaining the same; that is not a cut.
Another game played in this budget debate is the role of future interest payments. When a deficit plan reduces program spending or raises taxes, tit curbs the rise in government debt. Thus, there will be less interest payments on the lower debt. Congress calls this possibility lower interest payments a spending cut.