Deficit Reduction Plan Very Limited
If you are confused about the plan to curb deficit spending while increasing the government’s ability to borrow money, you are not alone. The plan is so complex it makes pledges of “transparency” by both the White House and many in Congress seem like a bad joke.
But there is a bottom line, as difficult as it is to find. It is that the only set reduction in deficit spending called for in the agreement is to trim $900 billion in spending during the next 10 years. Other cuts may be made, but they are not certain under the agreement.
Put that in perspective: Concrete spending reductions amount to $90 billion a year. This year alone, the government is expected to spend about $1.4 trillion it can finance only by borrowing. The cuts, then, amount to only about 6.4 percent of the current deficit.
Look at another facet of the agreement: It caps spending by Cabinet-level agencies at $1.043 trillion for the 2012 fiscal year. That is just $7 billion less than 2011 levels – a reduction of less than seven-tenths of one percent.
Clearly, the government plans to be off to a very slow start in reducing the deficit. In fact, government during the next 12 months – an election year, we would note -probably will be impacted very little, if at all, by the cuts.
A second important part of the agreement calls for a special panel of members of Congress to recommend more spending discipline, of as much as $1.5 trillion during the next decade. We will be very surprised if that initiative comes to fruition.
Members of Congress had very few options other than to go along with President Barack Obama on the deficit reduction-spending ceiling plan. But conservative lawmakers did build something of a safety valve into it.
Unless the congressional panel referred to above is successful, a new debt ceiling debate may have to be held next year – just in time for voters to consider it before they go to the polls to vote for president and many members of Congress. That would be appropriate timing.