The Learning Curve

New tricks for an old dog.

The grand budget bamboozle

bam·boo·zle (tr.v.)
Informal. To take in by elaborate methods of deceit; hoodwink.
Variations: bamboozled, bamboozling, bamboozles

The Sting

Seeking a cultural metaphor to encapsulate the debt ceiling standoff of July and August, one need look no farther than the 1973 Paul Newman – Robert Redford classic film, The Sting. In that movie, a vagabond group of petty criminals band together to right a wrong, and to steal from the rich and murderous crime boss for the benefit of the poor. The Sting is a Robin Hood story executed by means of finesse and intelligence, rather than with swords and force,  with an impressive display of of legerdemain and over-the-top showmanship. Nobody actually gets killed or injured as justice is dispensed.

The audience understands at the movie’s end how badly crime boss Doyle Lonnegan (Robert Shaw) was out-foxed, but Lonnegan himself is merely confused. suspicious, and hustled. It will take him some time to understand that the Redford and Newman characters picked his pocket of half a million dollars, and got away with it.

Obama arrives in Chicago August 3, 2011

Budget Control Act of 2011
(P.L. 112-25, S. 365, 125 Stat. 239, enacted August 2, 2011)
Full text from the Government Printing Office

This is the name given to the deal enacted on August 2, 2011 that raised the Federal debt limit and staved off the Republican threat of self-inflicted sovereign default. It is a difficult bill to read and understand, and it contains several parts in addition to raising the debt limit. Two Hundred two Congressional Republicans, seventy percent of them, voted for this bill. It might be fair to say that not one of them understood in full detail what the Budget Control Act of 2011 (“The Act”) actually provided. If the Republicans  had understood it, they would never have voted for it.

Cut, cap and no balance

A salient feature of The Act is the limit it places on Federal discretionary spending for fiscal years 2012 through 2021. The Federal budget concept of “discretionary spending” is adjusted by The Act by specifically including the following items in the working totals.

  1. Overseas contingency operations and global war on terrorism;
  2. Continuing disability reviews under Social Security;
  3. Health care fraud abuse control program (account 75–8393–0–7–12 571), and;
  4. Disaster funding.

Some of these are nominally mandatory spending items and have caps of their own imposed by The Act.

For fiscal years 2012 and 2013, The Act expresses its basic adjusted discretionary spending limits in two categories:  Security and non-security. The spending limits for all subsequent years (2014 – 2021) are aggregate sums.

The term ‘security category’ includes discretionary appropriations associated with agency
budgets for:
  1. The Department of Defense;
  2. The Department of Homeland Security;
  3. The Department of Veterans Affairs;
  4. The National Nuclear Security Administration;
  5. The intelligence community management account (95–0401–0–1–054), and;
  6. All budget accounts in budget function 150 (international affairs).

The ‘non-security category’ is everything else.

For fiscal year 2012, The Act caps security spending at $684 billion, and non-security at $359 billion. For fiscal year 2013 these numbers are, respectively, $686 billion and $361 billion. At first glance, one might think that these spending caps are weighted in favor of defense spending, and against domestic spending. That’s what I thought at first, but digging into the budget numbers tells a different story. The ‘security category’ is cut by a percentage amount greater than  2 to 1 compared to the ‘non-security category” .

Hard numbers

Using numbers provided by the Office of Management and Budget, Public Budget Database – Budget Authority, it is possible to add up the amounts that comprise the ‘security category,’ as defined by The Act.

FY 2006 – $629 billion
FY 2007 – $727 billion
FY 2008 – $812 billion
FY 2009 – $824 billion
FY 2010 – $857 billion
FY 2011 – $879 billion
FY 2012 – $684 billion
FY 2013 – $686 billion

By capping the FY 2012 ‘security category’ spending at $684 billion, Congress has agreed to roll that collection of budget items back to pre-2007 levels, in aggregate.  It is a 22.2% decrease from the $879 billion FY 2011 funding levels. This compares to The Act’s 10.4% reduction in the ‘non-security category,’ from $400 billion to $359 billion.

The trick

The discretionary spending limits The Act imposes are automatic, by a process called sequestration. This mechanism was perfected by the Balanced Budget and Emergency Deficit Control Act of 1985, also known as the Gramm–Rudman–Hollings Balanced Budget Act.  Since the mechanism of sequestration  makes flat percentage cuts across all non-exempt budget categories, regardless of priorities, it seems extreme.  Congress so far has been unwilling  to ever let it happen. When faced with the possibility of sequestration in the past, Congress has always repealed the budget caps.

Fiscal year 2011 ends September 30, but the Congressional appropriation process is far from complete. A Joint Resolution that continues government functions  beyond October 1 at the 2011 levels has been discussed, but the sequestration process will ultimately kick in to arbitrarily remove nearly $200 billion from the ‘security category.’ It could be an administrative and political nightmare. The best solution would be for Congress to devise an omnibus budget bill that incorporates the required spending limits.

The next trick

The Act also requires a Congressional ‘super-committee’ to devise a bill that eliminates at least an additional $1.2 trillion  of the budget deficit by FY 2021. If this deficit reduction bill is not enacted into law by January 15, 2012, The Act imposes a different set of discretionary spending caps for FY 2013 through 2021 for the ‘security’ and the ‘non-security’ category, but it also redefines the meaning of the categories. The net effect of the change is to focus spending cuts on he Defense Department, if Congress fails in its mission.

Smoke and mirrors

The Budget Control Act of 2011 is a nightmare to read, and if you believe any part of the Republican claims they “got what they wanted, ” or media claims that Obama capitulated, it makes it that much more difficult. What Republican wants to cut defense spending by 22%, but to cut domestic spending by only 10%?

Did Obama eat the Republican’s lunch?

After noodling the numbers in shocked disbelief for several weeks, that’s how it looks to me. If anyone has a better understanding of this legislative horror, I want to know about it.

I have to set this aside now for a while to let my brain cool off, but I have to say it looks like President Obama took the Republicans to the cleaners during the debt limit negotiations, and then he kept his mouth shut about it.

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Written by Tom Fox

09/20/2011 at 11:52 am

Posted in Politics

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