Reid debt plan would save more than Boehner bill, CBO finds
By Lori Montgomery, Felicia Sonmez and Paul Kane,
Updated: Wednesday, July 27, 10:14 AM
washingtonpost.com
A Senate proposal to lift the legal limit on the national debt would slice $2.2 trillion from the federal deficit over the next decade, short of its $2.7 trillion target but far more than a rival debt-ceiling package drafted by House Speaker John A. Boehner, congressional budget analysts said Wednesday.
The estimate by the nonpartisan Congressional Budget Office found the measure drafted by Senate Majority Leader Harry M. Reid (D-Nev.) would cut about $840 billion from agency budgets through 2021, roughly the same as the proposal by Boehner (R-Ohio). But Reid also claims significant savings from winding down the wars in Iraq and Afghanistan. The CBO found that those savings account for more than $1.1 trillion, making up more than half of Reid’s debt-reduction package.
Republicans have dismissed the inclusion of war savings as a budget gimmick, arguing that the nation has no intention of spending that money.
The new CBO report comes barely 12 hours after a similar report led House leaders to scuttle a Wednesday vote on their measure and sent them scrambling to find more savings or to reduce the $900 billion debt-limit increase included in the House bill. Boehner has demanded that spending cuts exceed any increase in the debt limit. Senate leaders, too, were expected to make adjustments to meet the dollar-for-dollar target.
While the Senate package would reduce spending more overall, by the CBO’s accounting, it would also cut more deeply next year. The House bill would reduce next year’s budget deficit by only about $5 billion, the CBO said, while the Senate bill would trim $30 billion from a one-year deficit expected to approach $1.1 trillion.
The CBO’s analysis Tuesday dealt Boehner’s measure a potentially devastating setback. It said spending cuts included in the House bill would save only about $850 billion over the next decade — far less than the $1.2 trillion advertised.
In addition to saving about $840 billion in non-war spending by government agencies, the Reid plan would reduce federal interest payments by $375 billion, the CBO said. The plan would also create a joint congressional committee to propose further deficit reduction.
On Tuesday, Boehner (R-Ohio) and Reid scrambled to build support for their proposals, but both plans appeared doomed without significant bipartisan modifications.
Boehner delayed a vote on his bill, which had been set for Wednesday.
The news on the Boehner proposal from the CBO alarmed conservatives, who were already balking at what they considered timid spending reductions. It also meant Boehner’s bill would not meet his own demand that the cuts exceed the size of the $900 billion debt-limit increase he proposed.
House Republicans raced Tuesday night to rewrite portions of the measure to bring those numbers into line, most likely by identifying additional savings, aides said.
As Boehner pressed toward a cliffhanger vote as soon as Thursday in the House, President Obama signaled that he is likely to veto the measure because it would force another battle over the debt limit early next year. Meanwhile, Reid pronounced the bill “dead on arrival” in the Senate, where Democrats were struggling to rally votes for Reid’s plan to raise the debt ceiling by $2.7 trillion — enough additional borrowing authority to cover the nation’s bills into 2013.
The legislative maneuvering played out against a backdrop of public outrage, as callers jammed the Capitol switchboard and visitors swamped congressional Web sites, apparently heeding a call Obama made Monday in a prime-time national address for Americans to contact their representatives in Congress.
At the height of the deluge, the Capitol was receiving 40,000 calls per hour, twice the normal rate. Some people encouraged lawmakers to stand firm, while others demanded a resolution to the weeks-long stalemate that threatens to undermine the sputtering U.S. recovery and damage the nation’s global standing. Still others were simply worried that the impasse could prevent their Social Security checks from arriving on time.
Kate Cyrul, a spokeswoman for Sen. Tom Harkin, said the Iowa Democrat’s office had received more than 700 e-mails and letters overnight, the majority of which “expressed frustration with the debt process and said that we should reach a compromise.”
The national debt has already hit the $14.3 trillion legal limit. Unless Congress acts by next Tuesday, Treasury officials say they could begin running short of cash for federal health-care and retirement benefits, military salaries and payments due investors, potentially throwing the U.S. government into default for the first time. Even if a default is avoided, credit-rating companies are threatening to downgrade the nation’s AAA rating, a move that could drive up interest rates for governments at all levels, as well as for ordinary Americans.
Some Republicans have challenged the Treasury’s warnings, arguing that the economic impact of cutting off the Treasury’s borrowing power would be limited.
While Boehner was facing major hurdles in persuading the House to approve his proposal, Reid was faring no better in the Senate. Democratic aides acknowledged that the Senate bill is unlikely to pass as written, because it lacks Republican support.
That backing was not forthcoming Tuesday. Senate Minority Leader Mitch McConnell (R-Ky.) criticized the Democratic alternative, saying it contains “highly suspect spending reduction features.” He argued that more than a third of Reid’s $2.7 trillion savings estimate would come from winding down the wars in Iraq and Afghanistan — and therefore would count as savings money that Obama never intended to spend.
With less than a week left to reach a deal, Reid spoke with Boehner by phone Tuesday morning and later met with McConnell about a potential compromise. But the leaders remained deeply divided over the size and duration of an increase and the mission of a debt-reduction committee that each measure would create.
Under Boehner’s bill, the bipartisan 12-member panel would be required to deliver $1.8 trillion in additional savings by the end of the year. Adoption of a debt-reduction package would clear the way for Obama to increase the debt limit into 2013 without explicit congressional approval. But if the committee did not act, or Congress did not adopt its recommendations, policymakers would face another harrowing battle on the matter.
Late Tuesday, congressional leaders were still searching for a way to ensure that Congress adopts a far-reaching strategy — or to guarantee that lawmakers would raise the debt limit into 2013 without such a plan. McConnell said that they were close to a deal Sunday but that Obama rejected it.
“We’re going to have to get back together and get a solution here. We cannot get a perfect solution, from my point of view, controlling only the House of Representatives. So I’m prepared to accept something less than perfect,” McConnell told reporters. “We are trying to get a result here, and we know we can’t get a result without something that can pass a Republican House, a Democratic Senate, and be signed by a Democratic president.”
Democrats said one option under discussion is reviving recommendations from the Senate’s so-called Gang of Six — an idea that has won support in both parties. For example, negotiators discussed adding a mechanism for moving a cost-cutting plan forward if the debt-reduction committee did not do so.
In that case, 10 senators — five from each party — could bring their own plan before the Senate without fear of amendment or filibuster. In theory, the group of 10 would be composed of moderates more inclined to compromise on raising taxes and cutting entitlement spending than the 12 committee members, whom party leaders would choose.
“We need to do whatever we can do to reassure capital markets and make sure we don’t have a downgrade to our debt. And part of that is going to be creating a path forward to give the markets confidence that we are going to act comprehensively on our debt and our deficit,” said Sen. Michael F. Bennet (D-Colo.), a Gang of Six supporter who huddled with more than a dozen Senate Democrats on Tuesday in search of a solution.
If Boehner’s bill can’t clear the House, Reid’s talks with McConnell about winning GOP backing for the Senate measure would take on even greater urgency.
Even before the CBO analysis became public, Boehner faced trouble among lawmakers on his right flank, who argued that his measure would do too little to curb government spending. According to the CBO report, the Boehner bill would cut agency’s authority to spend money by $44 billion next year, but it would actually reduce next year’s budget deficit by only $5 billion.
Key conservative and pro-business groups were split over the measure. The U.S. Chamber of Commerce and Americans for Tax reform endorsed it, while the Club for Growth and Heritage Action did not. More than a dozen House Republicans and five GOP senators announced their opposition to the plan, while many more House members said they were leaning against it.
The cost estimate could only hurt, not least because it offered an eerie reminder of the disappointing CBO report that earlier this year revealed that a government funding bill for 2011 would also save much less than expected — nearly killing a plan to avert a government shutdown.
In a sense, House Republicans were paying a price for their own success. The CBO said Boehner’s bill would save $1.1 trillion over the next decade compared with the budget as it stood in January, before Congress adopted sharp reductions to the 2011 budget for domestic agencies.
Boehner won that fight, cutting nearly $250 billion from projected spending over the next decade, the CBO said. But that forced the agency to draw up new budget projections in March. Measured against the new figures, Boehner’s debt-limit bill would save only $850 billion through 2021, the CBO said.
Democrats said they were stunned that Boehner seemed unprepared for the news. “They should have known this was coming for months,” one party aide said.
White House budget director Jacob J. Lew encouraged lawmakers not to judge Boehner too harshly, noting in a blog post that all the debt-reduction plans on offer — from the House Republican budget adopted in April to Obama’s own framework for slicing $4 trillion from projected borrowing over the next 12 years — used the same January starting point.
“Throughout our weeks of talks, all parties have worked off a January baseline because we all recognized that we needed to start from the same place,” Lew wrote. “There is a lot in Speaker Boehner’s plan that we do not like and actively oppose. But, as this debate continues and intensifies in the coming days, it’s important that we compare apples to apples, and make sure that we are all understanding the facts.”
Boehner, meanwhile, pledged to fix the problem.
“We’re here to change Washington — no more smoke-and-mirrors, no more ‘phantom cuts.’ We promised that we will cut spending more than we increase the debt limit – with no tax hikes – and we will keep that promise,” Boehner said in a written statement. “As we speak, congressional staff are looking at options to adjust the legislation to meet our pledge.”
Until the CBO issued its report on Boehner’s bill, House Republican leaders believed support for it was growing, although its passage was far from certain. Few if any Democrats are expected to support the measure, and House Minority Whip Steny H. Hoyer (Md.) was urging those few Democrats who might be inclined to back it to hold their votes until Republicans had produced a majority on their own.
With 240 Republicans in a chamber with 433 lawmakers, that means Boehner can afford only about two dozen defections.
Some key conservatives were trying to help, notably Rep. Allen West (Fla.), a freshman who has built a reputation for outspoken media appearances and publicly questioning the motives of his leaders.
At a closed-door meeting Tuesday morning, West gave a passionate speech in favor of the plan, even though it only delivers on “75 percent” of the GOP’s objectives. West later told reporters that, during his Army days, the most effective soldiers were those who took 75-percent plans and “executed them 100 percent” rather than trying to be perfect from the start.
Rep. Jeff Flake (R-Ariz.), a longtime deficit hawk who criticized the idea of punting spending decisions to a special committee, said he remains undecided. However, he said he could not support the Reid plan or a government default.
“I have issues with it,” Flake said of Boehner’s bill. But, he said, “it may be the last train leaving the station.”
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