The Numbers Behind the $38.5 Billion (or $352 Million) Budget Deal

$38.5 billion in cuts? $352 million? $20-$25 billion? Yes.


Remember last week’s $38.5 billion budget deal? The one that averted a government shutdown? If you’ve paying attention to the news, you might have noticed that that $38.5 billion is a suddenly slippery figure. Depending upon who you listen to, deal actually only cut $352 million (with an ‘m’) in spending, or added $3.3 billion (with a ‘b’), or looking over the longer term, it cut $20-25 billion or maybe even $315 billion.

Is your head spinning yet? Here’s a primer on where the various figures come from and what they mean.

The first thing you need to understand is the difference between “budget authority” and “outlays.” Budget authority is the amount of money the various parts of the government are permitted to spend in a fiscal year. The outlays part is the money that has actually gone out the door. There can be a variation between those figures because money doesn’t get spent as soon as it is authorized. In some cases, defense spending on wounded veterans, for example, the money goes out the door quickly. In other cases--high speed rail, for example--the money spent this year is relatively small as the projects get untracked, as it were. The major expenditures come in later years. So cutting budget authority translates to a small cut in spending in fiscal 2011, but a larger one down the road. [Check out a roundup of political cartoons on the budget and deficit.]

With that in mind, here’s where the numbers come from. First there’s…

$38.5 billion. That was the figure advertised when the compromise deal was announced and a shutdown was averted last week. It represents the overall cut in budget authority in fiscal year 2011 from fiscal year 2010. Had spending authority continued at last year’s levels, according to the Congressional Budget Office, the government would have $1,087,465,000,000 in budget authority; instead the final figure is $1,049,782. (Which is actually $37.6 billion, but close enough.) You might also hear a $78.5 billion figure, especially if you’re talking to a Republican trying to explain that they really got close to the $100 billion in spending cuts they promised in the 2010 campaign. That number reflects spending authority as compared to President Obama’s fiscal year 2011 budget request, which was never passed. [See editorial cartoons about the Republican Party.]

In any case much of the fuss surrounding the size of the cuts has to do with the difference between spending authority and outlays. Which brings us to …

$352 million. That’s the net cut in spending over the remainder of fiscal year 2011 (which runs through September), according to the CBO. Where’d all the cuts go? A few places. First off, some portion of the budget authority savings was not going to become outlays anyway. This was spending that was authorized but which was not going to be spent. The Census Bureau, for example, had around $2 billion left over unspent which was axed in the budget deal. That savings comes out of budget authority, because the Census Bureau is no longer authorized to spend it; but CBO doesn’t count it as an outlay saved because it wasn’t going to be spent anyway. Then there is spending that was authorized but that, as discussed above, will not translate into big outlay savings this year because the projects are still in their initial phases. And partially the figure is small because the $37.6 is for the entire fiscal year while the spending affected is only for the balance of the year, less than half of it. [See more stories about the deficit and national debt.]

According to press reports, the budget deal cuts roughly $8 billion from this year’s outlays, but it also increases defense spending a similar amount. The difference ends up being a $352 million cut. Unless of course you include the various wars the United States is engaged in, which case you get …

$3.3 billion. The U.S. wars in Iraq and Afghanistan are off budget. They count as “emergency” spending. When you include the emergency outlays in the tally, spending goes up by $3.3 billion for this fiscal year.

But, Republican leaders argue, you have to take the long view to appreciate how much is being cut in this deal. CBO puts that figure at…

$20-$25 billion. As the cuts in budget authority play out and stop outlays that are relatively small this year but would have been bigger in coming years, CBO figures that $20-$25 billion that would have been spent will now not be. That’s still sharply less than the $37.6 billion in reduced spending authority. The difference is money (like the unspent Census funds) which CBO doesn’t think was going to be spent in any case. “The vast majority of the $20 billion to $25 billion reduction in projected outlays would fall in the five-year period spanning fiscal years 2012 through 2016, with a small amount occurring over the 2017-2021 period,” CBO reports. $20-$25 billion will definitely not satisfy the Tea Party crowd, so the GOP crunched the numbers and came up with… [Check out political cartoons about the Tea Party.]

$315 billion. Republicans on the Senate Budget Committee produced this number essentially by using the fiscal year 2011 spending as a baseline and comparing it to what the spending level would have been if the fiscal year 2010 numbers were the baseline. They figure this saves about $253 billion directly and also saves an additional $62 billion in interest payments.

Ain’t Washington math grand?

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