Reality check: $2.5 trillion in deficit cuts
By Jeanne Sahadi @CNNMoneyFebruary 12, 2013: 11:04 PM ET
NEW YORK (CNNMoney)
How much have President Obama and Congress cut federal deficits so far?
"Over the last few years, both parties have worked together to reduce the deficit by more than $2.5 trillion," Obama said in his State of the Union address Tuesday.
What did he mean? That $2.5 trillion is the amount of deficit reduction over a decade compared to where things stood in August 2010, according to calculations from the bipartisan Committee for a Responsible Federal Budget.
Why August 2010? That was the launching point used by the president's fiscal commission chaired by Erskine Bowles and Alan Simpson.
Where does the $2.5 trillion come from? Several sources: savings from the 2011 Budget Control Act, lower spending levels enacted in temporary government funding resolutions since 2010, and the fiscal cliff deal passed at the start of this year.
In fact, the latest savings estimate is actually closer to $2.7 trillion, according to Marc Goldwein, CRFB's senior policy director.
Of that amount, $1.57 trillion comes from spending cuts, $690 billion from increased tax revenue and $430 billion from interest savings.
But how much deficit reduction has been achieved can be measured differently. For example, the savings look much smaller if you choose an earlier starting date.
That's in part because August 2010 marked a high point for federal spending on "discretionary" programs. If, say, August 2007 is the comparison point, the savings amount to only about $450 billion, according to CRFB's estimates.
The summer of 2007, of course, predated the steep drop in revenue and the more than $1 trillion in stimulus injected into the economy as a result of the financial crisis and the recession.
What the politicians play fast and loose with is the term "cut" or "cuts." To me, cutting an increase in spending is not a "budget cut." This is because I do not believe that spending increases must be automatic - even to adjust for inflation. Also, when you cut spending increases - given the relative stagnation in GDP and revenue - you are still accumulating debt because nothing is being done to pay down the PRINCIPAL. So the interest piled upon existing debt only increases the total debt and makes those "cuts" in spending increases useless.
What the President should have done is accepted the Simpson-Bowles recommendations and implemented them ALL. This would have dealt with the totality of the problem. But he didn't want to do that because it meant taking ownership of the problem with an upcoming election looming. And despite his large electoral college victory, the popular vote difference between him and Romney was only around 4% - hardly a "landslide" or even a "mandate." Cutting benefits might have alienated enough of his consitutency to tip the election to Romney - despite the campaign fumblings of the GOP.
Politics got us into our fiscal mess, and politics is perpetuating it. Neither side is blameless. Fiscal cliffs and sequestrations have yet to move them off the dime.
There has only been 600B in real deficit reduction, Brett Baier explains it here. Why doesn’t the media tell the truth, the whole truth and nothing but the truth, said Windell! Baier is a true journalist.