Though the idea has been thoroughly discredited, the President and Members of Congress are still considering a large, thoroughly bogus “savings” option to help cover their profligate spending: They intend to claim war spending that was never going to be spent as “savings”—and then spend it on something else. It is one of the most embarrassingly transparent gimmicks in town, and it should be shunned permanently.
The alleged “savings” come from a reduction in estimated projected spending on U.S. activities in Iraq and Afghanistan. But those activities—termed Overseas Contingency Operations (OCO)—already are winding down. The projected spending does not exist, and never will exist—and therefore neither do the “savings.”
These Twilight Zone savings are only an artifact of the way the Congressional Budget Office (CBO) estimates future spending. As explained yesterday in a blog post by CBO Director Douglas W. Elmendorf:
CBO, in its baseline projections for OCO spending, follows the rules set in law for projecting discretionary spending—that is, it projects appropriations in future years equal to those in the current year, with adjustments for inflation. But that is just a baseline projection; the funding has not yet been provided, and there is no “OCO fund” set aside in the Treasury from which resources can be drawn in future years.
That is typically mild CBO-speak for: “You can’t be serious.”
But the President and lawmakers are in a bind. They are trapped in several budget crises of their own making, and now need a deus ex machina to escape. The President wants the “savings” to spend on more Keynesian-style economic stimulus. Members of Congress want them for at least two other options: to pay for the “doc fix,” which they have adopted year after year to prevent a sharp plunge in payments to Medicare physicians, or to help finance a bloated transportation bill. But to say it again, these savings do not exist. Therefore, they cannot reduce the deficit, and they cannot offset more spending. End of story.
President Obama has attempted this trick before, starting with his first budget, so he could claim large savings by proposing to spend less than those amounts. He used it again in his September “jobs” proposal. Senator Harry M. Reid (D–NV) made the same attempt in last year’s debt limit negotiations proposal, only to see the bogus savings lambasted by principled Members of Congress who can recognize a gimmick.
It is bad enough for the President and Congress to claim completely unreal savings. Even worse is when they then turn around and plan to spend them. Enough is enough. Congress and the President should give up the fakery, take the budget seriously, and find budgetary savings that exist in the real world.