Free Markets, Free People

The $32.5 billion in cuts are real cuts

They’re not all smoke and mirrors as some are alleging.  But you have to understand the budget process to know that.  Quin Hillyar explains:

Anyway, yes, the cuts are not of the high quality of cuts we might like. Yes, there are a few which can only be characterized as smoke and mirrors. But no, the bulk of these cuts are not meaningless; most of them actually will keep money from being spent that otherwise would, yes, be spent. In other words, most of the complaints are groundless.

Here’s why. This is an Appropriations bill. Approps bills are primarily expressed through "budget authority," not through "outlays." A project in an Approps bill that receives budget authority in FY 2011 might not actually get spent — there may not be an "outlay" of the full amount — in 2011. If it is a construction project, that will almost certainly be the case. This late in the fiscal year — which began last October 1, and thus is more than halfway over — some of these projects may not even get the contracts signed before the end of the fiscal year. So cutting that project would not cut a single dollar from actual spending this year. But that does NOT — NOT NOT NOT NOT NOT — mean that cutting the project is a waste of time. If the budget authority is removed, it means that the money that absolutely would have been spent in future years now CANNOT be spent, by law. It saves real money.

Hillyar worked on the staff of the House Appropriations Committee during the time Republicans balanced the budget and brought Bubba to the table to sign kicking and screaming all the way (you remember Clinton’s "can’t be done" statement, right?).

More clarity about the process:

The savings are real. It’s the same thing with a lot of the items that critics are calling "smoke and mirrors" just because they don’t cut this year’s outlays. The criticism is utterly ill-informed and baseless.

Granted, there also are accounts that contain leftover money that supposedly wasn’t going to be spent anyway — so in this case, say the critics, cutting the budget authority doesn’t save money; it’s just forcing the official accounting to catch up with the reality of the unspent funds….. Well, yes and no. Or rather, maybe. The dirty little secret about unobligated funds is that many of them are in accounts that aren’t impressively tight. Executive branch bureaucracies, without approval of Congress, often can tap into those funds (in effect) for other purposes, merely by shifting them among accounts. Most funds are fungible. That’s why Sen. Tom Coburn is making such a big deal, overall (apart from this battle), about cutting hundreds of billions in unobligated funds: because as long as they remain on the books, they still can get spent, and in most cases will get spent. Therefore, eliminating the budget authority for these programs does indeed save real money. It’s not just an accounting trick. It takes away all legal authority to spend that money. It means the taxpayers will not be on the hook for the money.

So while maybe not ideal in terms of the amount of “high quality” cuts we would have preferred, believing the narrative that they’re all smoke and mirrors is just wrong.  When a program has budget authority, it is funded and those funds will be spent – by someone.  That authority has now been withdrawn and thus the ability to spend even a penny of the formerly allocated funds goes with it.

An even better silver lining (again something you have to understand about the process to appreciate the impact):

Also important is that they force the overall spending baseline lower. So much of what happens in Washington budgets involves comparing spending year to year. If you take away budget authority EVEN FOR PROGRAMS THAT NEVER WOULD GET SPENT, you also make the official baseline for future years lower. It thus becomes far harder for the left to demagogue GOP spending proposals, because the proposals will be compared to a lower starting point than they would if the programs in question still remained on the official books. Anybody who doesn’t think this is an important budgetary victory is either ignorant or a fool.

Or both.

All of these things are important.  Removing the budget authority essentially defunds a program, or, as mentioned, stops it in its tracks and removes the money from being available to the program being defunded.   It also removes it from the grasping, greedy fingers of bureaucrats ready and eager to take whatever money they can get their hands on and spend it.

Best of all worlds?  Probably not.  But certainly not at all the worst of all worlds.  Anytime we can save money and force the spending baseline lower seems to me to be a victory.

~McQ

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10 Responses to The $32.5 billion in cuts are real cuts

  • Let’s be clear here … any savings greater than 0 is better than what Nancy Pelosi would have passed

    • Then again, the Republicans did something that the Democrats failed to do last year .. pass a budget resolution by April 15th as required by the “Budget Act.”

      The House has adopted Rep. Paul Ryan’s 2012 budget resolution, which would cut $6 trillion in spending over the next 10 years, on a 235-193 vote. No Democrats voted for the plan.
      Nancy Pelosi should be ashamed of herself, but she is incapable.

  • The thing that tore my sheets was the accounting trickery.  Seemed like deja vu all over again…
    I want REAL stuff.  Tell me what it is, then get it.  Simple.

  • Anything they do that involves mostly future promises, instead of actual action today, I discount to near zero. Establishment Republicans just have no credibility with me anymore. I guess this deal is better than a total cave into even more spending, but the debt counter keeps on spinning its wheels just as fast, and that’s where our real danger is. 

    I feel like they just fastened on to the first thing that felt good, was low risk, and that didn’t require them to stand in front of American citizens and tell them that we’re going towards meltdown if we don’t cut spending fast and hard. They let the usual DC sales pitch suck them in:

    That’s right, Mr. Politician, YOU can have a brand-new 2011 Debt and Spending Reduction Plan for NO MONEY DOWN, and NO PAYMENTS TILL 2012! (*)

    (*) Payments can be delayed or rescinded by majority agreement with other politicians. Interest rates vary, and may be increased at will by various foreign and domestic creditors. This plan does not actually reduce debt. The Plan is not guaranteed to mollify special interest groups expecting more spending, or those expPcting real honest-to-God cuts. This Plan is not guaranteed to assist in re-election. Some politicians experience side effects after adopting this Plan, including headache, lowered contributions, a rash of Tea Party opposition, and humiliation on blogs and YouTube. Your mileage may vary. 

    • The House has pushed Ryan’s Budget through the lower chamber.  The Senate will, on party lines, probably reject it, or propose major changes.  The Budget is not actually binding.  It serves to establish a ceiling on expenditure.  Differences will be ironed out in a joint House -Senate conference of leaders of finance committees.  It will go to Obama who will sign or veto it.
      The next steps are a series of appropriations bills.  The democrats passed big omnibus bills with huge increases in spending to conceal what they were doing.  We cannot allow these omnibus bills to continue.  Ryan’s committee must initiate department and agency appropriations bills (e.g., Defense and FAA) as separate bills.  If I were he, I would pass three appropriations this sumer – defense, social security and medicare/medicaid.  These appropriations keep essential government funding alive and really diminish the leverage Reid and Obama have going forward. 

      For example, if the Department of Agriculture were prohibited from granting billions to Archer Daniels Midland for ethanol and biofuels, they can negotiate in House-Senate conference to reconcile the differences, but if Ryan refuses, they get zero.  [This mechanism is important.  I do not know if ADM is actually getting a grant.]

      The defunding of government will be broadly welcomed by the American people.  In November 2012, their approval will be the reward.

      • Then they should have stayed with weekly CRs instead. Caving on 2011 budget and making it a media circus sucked all the wind from Ryan’s 2012 budget.

  • Lets see what happens with the Ryan plan.   That will tell the tale

  • I simply have lost ALL faith or trust in ANYONE in D.C.   My simple way to see if cuts are real is: did the government spend more or less than last year, is our total debt higher or lower than last year?  Everything else is smoke and mirrors.