Congress Never, Ever Cuts Spending

By Kurt Brouwer

The bipartisan ‘Gang of Six’ group of Republican and Democratic Senators has been in the news with a plan to cut the deficit by $3.7 trillion over 10 years. Of that total of $3.7 in reduced deficit spending, $2.7 trillion would come from ‘cuts’ and $1 trillion from tax increases.

 Unfortunately, many Americans are falling for news reports that tell of budget slashing or Draconian cuts or         whatever.  Of course, the cuts are always going to come next Tuesday or next year or in 10 years, just never today.  And, any cuts that are actually put in place are not cuts at all as a real human being would view them.  Rather, they are cuts in the rate of spending growth.  That is, Congress wanted a 10% increase, but only got a 5% increase, so that’s a cut.

If you doubt me, look at actual Federal spending, not the rhetoric.  Do you see any cutting?

[Update: Thanks to a tip in the comments from MarketWatch.com Global Commentary Editor, Rex Nutting, I added more decimals to these spending numbers and fixed one error, which was that 2009 was shown as 3.1 instead of 3.51 trilliion]:

Federal Budget Year                    Amount Spent

2008                                             $2.98 trillion

2009                                             $3.51 trillion

2010                                             $3.46 trillion

2011 (est.)                                   $3.81 trillion

There are those who believe we need to raise income tax rates and cut spending in order to reduce the budget deficit.  This is an idea that makes sense and seems entirely reasonable.

One problem is that higher tax rates frequently fail to achieve significantly higher tax revenuesbecause taxpayers change their behavior.  Make sure you understand the distinction between tax rates and tax revenues.  Go here if you are not clear on this critical issue.

Second problem: Congress never, ever actually cuts spending.

President Clinton & divided government

The only time we have had a Federal budget surplus recently was during the end of the Clinton administration when we had a President from one party and Congress in the hands of the other party.  Spending increases were restrained.  Income tax revenues went up because economic growth was solid and we reached budgetary surplus.

Now, it is true that income tax rates were higher back then.   For those who think higher tax rates were the answer to the surplus, please check out the numbers.  In President Clinton’s last full year, fiscal year 2000 which ended Sept. 30, 2000, Federal revenues and spending were as follows:

• Revenues: $1.88 trillion

• Spending: $1.77 trillion

We now take in about $2.2 trillion per year in revenues.  Had we held the line on spending, we would still have a surplus or a modest deficit.  To see the data for the Clinton administration years, click here:

I would be happy to have Clinton-era tax rates, if we had Clinton-era spending.  Unfortunately, we are now spending twice what we did under President Clinton only 11 years ago. Do we have twice as many people? No.  Has inflation been really high? No.  We are just spending more because a bipartisan group of politicians likes to spend.

We had a surplus back then because Congress held the line on spending and tax revenues grew due to strong economic growth.  If we want to get the deficit down, this is the formula we need to use again.  Hold the line on spending growth and remove barriers to private sector employment and economic growth.  Higher tax revenues will follow.

No Federal budget since April 2009

If you think I’m wrong, just ask yourself why Congress has not passed a budget in more than two years.  That is correct, there is no actual budget.  The last Congress abdicated its responsibility because passing a budget means you own the political consequences for that budget, including the spending.  So, we get no budget for over two years. So far, the same is true of this Congress.  Therefore, how can we talk of spending cuts, if we do not actually have a budget?

No matter what you hear in the media, remember: Congress never, ever cuts spending

As an example, if you actually drill down into the language of the cuts put forth by the so-called Gang of Six, you find a lot of vagueness and absolutely no specificity as set forth in this Washington Examiner piece [emphasis added].

Today, Washington was abuzz with the of the “Gang of Six” deficit-reduction plan, which received a boost when Sen. Tom Coburn, R-Okla., decided to rejoin the bipartisan group of Senators he had previously left in May.

Though it’s being billed as a $3.7 trillion deficit-reduction package, based on the limited details we have, it looks like it defers the actual tough decisions to a later date.

The spending cuts of $2.7 trillion are supposed to come over 10 years.  Right.  Isn’t that convenient.  Defer those tricky cuts to a later Congress.  How brave.  As though this Congress can direct what Congress is going to do 10 years in the future.

If you think I’m wrong, consider the ‘immediate deficit savings’ or spending cuts of $500 billion in the Gang of Six proposal. Well…..immediate has a different meaning in Washington DC than it does at my house.  The Examiner piece continues:

The plan claims just $500 billion in “immediate deficit savings,” but even these don’t seem all that immediate. Here’s what’s included as “immediate”:

– Statutory spending caps through 2015. But that still leaves the actual cuts to be determined.

– “(N)umerous budget process reforms.” Again, that’s not an actual cut.

– “Shift to the chained-CPI (a more accurate measure of inflation) government-widestarting in 2012, along with the following specifications for Social Security: (1)exempt SSI from the shift for five years, and then phase in the shift over the next five years; and (2) provide a minimum benefit equal to 125% of the poverty line for five years.”

…– “Require GAO and the Department of Labor to report to Congress on establishing a more effective unemployment insurance trigger.” Okay, so this requires other parts of the government to issue a report. How does that represent “immediate” deficit cuts?

As I noted, these are only the reforms that make up the theoretical $500 billion in “immediate” cuts.

The rest of the cuts are even more tenuous…

In other words, Congress could not cut its way out of a paper bag.  It’s just not in the Congressional DNA.  Don’t buy the rhetoric because that is all it is…political posturing and tired Congressional rhetoric.