Politicians, pundits, and bloggers – in Washington and across the nation – began praising or ripping the Bipartisan Budget Act of 2015 before its numbers were even revealed to the public. While that said quite a bit about those who ventured early opinions, it said far less about the Act itself.
As with the Ryan-Murray deal of 2013, I thought it best to wait until the Congressional Budget Office weighed in on the numbers. They have, and now I can conclude: the Act is a bad deal.
The numbers say it all: the spending cuts in the Act are less than barely half of the $80 billion in spending for FY2016 and FY2017 – even after correcting the CBO error that underestimated the spending cut by $200 million (and taking out about $5 billion in Strategic Petroleum Reserve sales). Even if one includes the $11.2 billion in effective tax hikes, throws in the other $21 billion in revenue items, and stretches the uses the outlay schedule to score the new spending, the result is still a net increase in borrowing of $3 billion a pitifully slim $1-billion plus in “savings” over 10 years.
UPDATE (including earlier strikethroughs) – Since this first posted, the Act has been amended, and is now barely in the black in constant dollars, some more explanation as to my concern is in order. The overwhelming majority of the spending cuts actually come in one year – the last year. As such, even taking inflation out of the picture (as these figures do) isn’t enough to get the real value. Using discount rates provided by OMB, we can determine the present value of dollars “saved” in 2025. The result? The Act has a net present value of -$2.9 billion. That’s down from -$6 billion-plus yesterday, but…
This also doesn’t take into account that over $11 billion of the “savings” is in “Tax Compliance”, which is an effective (though not a statutory) tax increase. Like all tax hikes (statutory and effective) it will change incentives, which the CBO doesn’t measure, and thus the figure is outdated and overcounted the moment it’s printed.END OF UPDATE
I understand that this also comes with an increase of $50 billion in defense spending (regular appropriations and OCO money), but that’s less than 5% of total military outlays for the next two years. Moreover, as with the 2013 budget deal, the two-year boost goes away in year three, meaning the Department of Defense cannot make major and necessary investments – or they’ll end up with permanent sustainment obligations that would not be covered.
I also realize that this Act includes a suspension of the debt ceiling until March of 2017. I hardly consider this to be much in the way of progress. This will leave the new president less than three months to sort out his or her budget priorities. The last time spending decisions were made in such a rush was the 2009 Omnibus – hardly an example of good governance. Truth be told, a stand-alone and permanent lifting of the debt ceiling would be preferable to this.
How ever much the supporters of the Bipartisan Budget Act 2015 want the deal to make our fiscal situation better, the numbers show that it makes things worse.
