2011 Budget Deal May Cut Closer to $25 Billion, Not $38 Billion, CBO Says

April 15, 2011 - 5:50 PM

House Speaker John Boehner (R.-Ohio) and Senate Majority Leader Harry Reid (D.-Nev.0

House Speaker John Boehner (R.-Ohio) stands behind Senate Majority Leader Harry Reid (D.-Nev.) outside the White House after meeting with President Barack Obama on Thursday, April 7, 2011. (AP Photo/Pablo Martinez Monsivais)

(CNSNews.com) – The 2011 spending deal reached between President Barack Obama, Senate Majority Leader Harry Reid (D-Nev.), and House Speaker John Boehner (R-Ohio) may be worth much less than many people believe, according to an analysis from the Congressional Budget Office (CBO).

While the CBO confirms that the deal saves close to the $38 billion originally claimed as being cut from the budget – $37.7 billion precisely – its analysis shows that those savings do not come from what many Americans would consider actual budget cuts.

In explaining how the funds are handled by the government, House Speaker John Boehner (R-Ohio) presented an analogy in a commentary published in Politico on Thursday.

“Think of it this way,” said Boehner. “You have $100 in your wallet that you were going to use to buy new clothes. You haven’t spent it yet, because you haven’t found shirts you like or decided you didn’t need them. Then someone comes along and takes away your $100.

“Now you can’t spend it – not on clothes or anything else you were considering,” Boehner wrote. “The money’s gone – your budget’s been cut.”

The $37.7 billion budget compromise that the CBO analyzed relates to Congress’ “budgetary authority,” which is the amount of money Congress says may be spent by a particular federal agency for a particular program.

Technically, this is how Congress spends money, by authorizing the various parts of the executive branch to draw a certain amount of money – or budgetary authority – from the Treasury Department. The various executive branch agencies then withdraw the money according to the terms of the programs Congress has chosen to authorize.

In other words, Congress authorizes the executive branch to write checks with federal funds. Such “budgetary authority” is therefore actually spending authority.

By cancelling this spending authority, Congress claims to be saving money because it assumes that executive branch agencies would otherwise spend the money, as they did in previous years. However, this may not always be the case, as CBO’s analysis reveals.

The CBO says that while Congress did, in fact, cut $37.7 billion in budgetary authority from fiscal year 2010 levels (for the remainder of FY2011), that canceled spending authority results in $20-25 billion less – not $37.7 billion – in actual federal spending, what the CBO calls “outlays.”

“CBO estimates that enactment of H.R. 1473 would produce federal outlays over the 2011-2021 period that are between $20 billion and $25 billion lower than the amount of outlays that would be expected from having 2011 appropriations set at the same level as 2010 appropriations,” the CBO wrote.

The difference comes from the fact that Congress cut the spending authority for many mandatory programs that the CBO thinks would never have actually been used. In other words, Congress took money off the table that the CBO thinks would have merely stayed there any way.

“Many of the reductions in budget authority for mandatory programs would have little or no effect on outlays in 2011 or future years,” said the CBO.

The funding authority represents programs that have been funded by Congress but have not yet actually spent any money. These programs are, however, counted as spending in the federal budget passed by Congress.

Critics of the budget deal say that cuts to such programs are not actually spending cuts, even though they prevent executive branch agencies from spending money, because they do not decrease outlays – the technical name for federal spending. Republican presidential hopeful Tim Pawlenty criticized the cuts, saying they were really no cuts at all.

“The more we learn about the budget deal, the worse it looks,” said Pawlenty in a statement. “When you consider that the federal deficit in February alone was over $222 billion, to have actual cuts less than the $38 billion originally advertised is just not serious.”

“The fact that billions of dollars advertised as cuts were not scheduled to be spent in any case makes this budget wholly unacceptable.”