Can Boehner Find $8 Billion to Cut?

Several days before the August congressional recess, we noted that some conservatives were considering abjuring the House budget in favor of a 6-month CR to fund the beginning of FY 2013 in October.  Their rationale was to defer the major spending fights until 2013, when presumably, we would have more control over the final outcome.  Additionally, the original intent of this plan was to deny the Democrats and moderate Republicans the opportunity to use a must-pass spending bill to tack on tax increases and other bad proposals during the lame duck session.At the time, we weighed both the benefits and the drawbacks to this proposal and concluded that if Republicans are set on funding government at higher levels and funding Obamacare for the purpose of bypassing the lame duck session, they should make sure there is a parallel agreement to terminate the lame duck.  No such commitment appears to be on the horizon.  Now there appears to be another complication with the impending deal.  If Republicans don’t modify their agreement on the 6-month CR, they will wind up approving $8 billion more in spending for FY2013 than they did this past year.Pursuant to the 2011 debt ceiling agreement (Budget Control Act), the discretionary spending cap for the upcoming fiscal year was set at $1.047 trillion.  By setting the spending levels of the “clean” CR at $1.047 trillion, Republicans will ostensibly agree to $19 billion more in discretionary spending than proposed in the House-passed budget.  Any “clean” CR will obviously also include funding for Obamacare.  Some conservatives might feel that this is the price worth paying for deferring the battle to 2013, but I suspect that many more problems with the deal will begin to surface in the coming weeks.  The first problem is the additional $8 billion in spending that Republicans are prepared to support.Yesterday, Politico reported that the CBO is now projecting that discretionary spending will only reach $1.039 trillion in FY 2013.  Aside for outlays and revenues, budget drafters also consider “offsetting receipts” in the budget when calculating the final spending figures.  Many government agencies, such as the FHA and Freddie Mac, charge fees for their services.  Those fees offset the cost of gross outlays and produce the final spending figure – net outlays.  As the housing market begins to recover, CBO is predicting that FHA receipts from premiums for loan guarantees will increase, netting much of that extra revenue and offsetting up to $8 billion in spending.[As a parenthetical, it should be noted that the current accounting method for “offsetting receipts” obfuscates the true size and scope of government.  Instead of including them in net outlays, they should be included in revenues, while posting the full level of gross outlays to reflect the true cost of government.]Here is where you can observe how the culture of Washington spending has gotten us into this mess in the first place.  Most Americans who are languishing under permanent indebtedness would relish the news of lower spending estimates, and use it as an opportunity to save some money.  But not in Washington.  Much like the ancient Persian government described in the book of Esther, liberal politicians believe that any edict of spending “may not be revoked.”  Obama and the Democrats want to pocket the $1.047 trillion spending agreement, and spend the “additional” $8 billion on new programs instead of simply leaving spending levels at current levels.  Boehner and the Republicans must not go along with this scheme.At some point, conservatives will have to decide how much they are willing to compromise in order to defer our priorities until 2013.  In light of some of the recent shenanigans of the Romney campaign at the convention, conservatives should not place all their hopes and aspirations in 2013.  We might be squeamish about provoking a budget battle immediately preceding the election.  However, we need to come to the realization that, at some point, we will have to fight.  That fight will take place irrespective of which party controls the White House and Congress.Cross-posted from The Madison Project



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