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July 27, 2011 9:55 AM CBO: Reid plan produces huge savings

By Steve Benen

The Congressional Budget Office disappointed House Republican leaders at a key moment yesterday, releasing an analysis that found Speaker John Boehner’s (R) budget proposal saves less than advertised. It sent Republican leaders scrambling, and delayed a vote in the House by at least a day.

The non-partisan CBO has also taken a look at the deal offered by Senate Majority Leader Harry Reid (D), and come to a more favorable conclusion (favorable, that is, if one’s goal is significant debt reduction).

In the battle of budget scores, the Senate Democrats deficit reduction bill is the clear winner thus far over an alternative by Speaker John Boehner, which had to be pulled back from a floor Tuesday night for retooling.

The Congressional Budget Office released a report Wednesday morning that credits the Senate bill with reducing budget deficits by about $2.2 trillion through 2012, nearly three times the $850 billion credited to the Boehner bill on Tuesday.

Part of the disparity is owed to the fact that the House bill takes a two-step approach to raising the debt ceiling and therefore postpones actions on major entitlement savings until November and December. A second factor is the Senate’s willingness to take advantage of CBO baseline rules and claim large savings from winding down US military operations in Afghanistan and Iraq.

Reid had said his plan would produce $2.7 trillion in savings over the next decade, $500 billion more than the CBO’s findings. That said, the report is otherwise good news for Reid, especially as far as the politics are concerned.

After all, there are, in effect, two main proposals under consideration with less than a week remaining. There’s Reid’s plan, which enjoys quite a bit of Democratic backing, which offers $2.2 trillion in debt reduction and takes default off the table through the end of next year. Then there’s Boehner’s plan, which is struggling to get a House majority, which offers $850 billion in debt reduction and forces policymakers to have another debt-ceiling fight in six months.

Worse, multiple reports suggest Boehner’s plan would increase the likelihood of a credit-rating downgrade, while Reid’s would not.

Reason hasn’t played much of a role in the debate thus far, but this morning’s CBO score will make it that much more difficult for Republicans to argue an economic catastrophe is preferable to Reid’s revenue-free compromise.

Steve Benen is a contributing writer to the Washington Monthly, joining the publication in August, 2008 as chief blogger for the Washington Monthly blog, Political Animal.

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  • c u n d gulag on July 27, 2011 10:07 AM:

    If the real goal of the GOP (Garrote Old People) was deficit and debt reduction, there have been multiple proposals that would have pleased them.

    But, since the goal is to eliminate, or privatize (profitize) social safety net programs, the economy will continue to be held hostage.

    At this point, I think they would take any small cut to Medicare to take the onus off of Ryans plan.

    They need that to run against Democrats from the left in '12, just like the did against ACA in '10.

    The American public suffers from 'undefeatable ignorance.'

  • Joe Bauers on July 27, 2011 10:10 AM:

    "...this morningís CBO score will make it that much more difficult for Republicans to argue an economic catastrophe is preferable to Reidís revenue-free compromise."

    It would if they were constrained by fact and reason. Unfortunately that is not the case.

  • T2 on July 27, 2011 10:11 AM:

    clearly both Reid's and Boner's plans were hastily thrown together, which is why they both were overestimated. Throwing hugely important legislation together in such a rush is a terrible way to govern, not that it matters anymore (to either side, apparently).
    But Reid's plan (which the GOP says doesn't exist) saves lots more money and saves everyone the problem of doing this all over in a few months. For those two reasons the GOP will certainly REJECT this plan. Oh, and it would also be a win for the Dems, which must be avoided at all costs (even the national economy).
    Let's face it - neither plan will pass. And the GOP will REJECT anything Obama comes up with. That's where we stand.

  • walt on July 27, 2011 10:16 AM:

    The charade we're enduring has nothing to do with reducing the deficit. It's about embarrassing Obama, sticking it to the Dems, loving Jesus, and elevating Ayn Rand to sainthood.

    There's nothing Democrats can meaningfully do except capitulate to the GOP theater of the absurd. Because ultimately that's what these mouthbreathers want more than anything: to win. And if it means asserting up is down, Obama is Hitler, war is peace, or any other kind of reality inversion, so be it. To be a Republican is to be a "winner". Yes, you're also an asshole who would sell out his country for a campaign contribution but being a Republican means never having to say you're sorry.

  • kevo on July 27, 2011 10:16 AM:

    Hey Congress!

    Clean.Bill.Now!

    Politics later!

    I remember a time when what the Republicans are doing today was called Monkey Wrenching! These Teabagging sorts need to look up a little more often, and maybe they'd wee more than two balls dangling over their souls! -Kevo

  • Josef K on July 27, 2011 10:24 AM:

    I really wish Cantor or somebody in the GOP would just come out and say "we aren't going to raise the debt ceiling." Not because I want the economy to go off the rails (although I harbour the hope it would take the GOP down with it) but because this insane process is so damned wearing on the nerves.

    Let them be honest with us for a change and give the American people a clear choice, I say.

  • PB on July 27, 2011 10:31 AM:

    Both plans will result in a credit down grade. S&P is looking for $4 trillion to avoid the action.

    Both plans save the same amount of money, $800-$850 billion. You have to eliminate the "war savings" and the associated imputed interest cost of the advertised $2.2 trillion.

    Time for all politicians to be honest and admit they don't have the stomach to do the right thing for the economic health of the country.

  • Danp on July 27, 2011 10:31 AM:

    I just finished reading the CBO reports for both Boehner and Ried plans. For all the talk of an immediate crisis posed by deficits, the Boehner plan only calls for 1 billion dollars in savings through 2012. Reid's calls for 30 billion. The rest relies on the good will of yet-to-be-elected congresses.

  • Danp on July 27, 2011 10:37 AM:

    S&P is looking for $4 trillion to avoid the action. PB

    I wouldn't put too much stock in that threat. It's the equivalent of saying they are going to downgrade Chase-Morgan bonds unless they predict better earnings in the distant future. The threat itself should cause people to question S&P's motives.

  • PB on July 27, 2011 10:43 AM:

    S&P has boxed themselves in to a down grade so anyone who thinks that anything less than $4 trillion will avert it is mistaken. It is much different than a down grade of JP Morgan Chase bonds because so much of the government expenditures are already legal obligations and the US doesn't have the ability to file bankruptcy as a private company can. S&P's motives are to get ahead of the issue becasue they were vilified for being late to the party on CDO/MBO's

    Having said all of this, a down grade will only add 5-8 bps. to the 10-yr. Not getting the economics of the country in shape will be much more impactful.

  • catclub on July 27, 2011 10:45 AM:

    Did any one else notice that $2.2T by 2012 in the quoted text? That seems like a lot.

  • Joe Friday on July 27, 2011 10:46 AM:

    "Then there's Boehner's plan, which is struggling to get a House majority, which offers $850 billion in debt reduction and forces policymakers to have another debt-ceiling fight in six months. Worse, multiple reports suggest Boehner's plan would increase the likelihood of a credit-rating downgrade"

    Gee, probably isn't a very good idea to go on national TV and pound on your chest like a silverback gorilla if you don't have ANY your ducks in a row.

  • Danp on July 27, 2011 11:01 AM:

    Did any one else notice that $2.2T by 2012 in the quoted text - catclub

    That's a typo. The Politico article (and the actual plan) calls for 2.2T by 2021.

    It is much different than a down grade of JP Morgan Chase bonds because so much of the government expenditures are already legal obligations

    Morgan Chase bonds are also legal obligation.

    they were vilified for being late to the party on CDO/MBO's

    They were vilified for blessing instruments after being paid by the institutions they were blessing. And there is no indication that investors are worried about buying US bonds at near zero interest rates even today. The only threat is a Congress that insists it has the authority to refuse to pay its debt. Therefore, the downgrade would seem to suggest that "gee whiz, they might actually refuse to pay unless the deficit goes down, regardless of ability."

  • PB on July 27, 2011 11:13 AM:

    Danp

    I agree that the down grade is a total non-issue. Yields on the 10 yr. are down 40bps since US was placed on creditwatch in April.

    Difference is the JPM bonds can be discharged in BK. US govt. has no such mechanism.

    Real issue is making real changes to the economic path that the country is currently on- why hasn't anybody brought up that all plans use an assumed growth rate of 4-5% when current outside estimates are for half of that number......

  • Schtick on July 27, 2011 12:26 PM:

    I just watched Reid, Durbin and Schumer speak to the media. Only station in my area that covered it was MSNBC and after Schumer made fun of the repubs using The Town clip to rally support with the repubs, the station cut it off. This is why the dems can't get their message out and this is why they make deals with repubs. No one will listen unless they are willing to make deals with the repubs. If it was repubs making a statement, all the media would have it and replay it for the rest of the day. Liberal media my ass.
    I am so disgusted with the dem party for making deals and selling us out, especially Obama. The debt ceiling and the budget shouldn't even be talked about together as any kind of package. I always thought Reid had a jelly spine and I'm seeing that Obama is made of jelly. He has it in his head he has to deal a repub package instead of stand up and demand they deal with the debt ceiling now and the budget later. He may well be looking for re-election, but I'm finding it extremely difficult to want to vote for him again. If he's going to promote and support repub ideas and plans, might as well have a repub to sell us out instead of a dino.

  • Doug on July 27, 2011 10:27 PM:

    "I'm so disgusted with the dem party (sic) for making deals..." Schtick @ 12:26 PM.

    You, perhaps, would prefer the "dem party" to "draw a line in the sand"? Refuse to negotiate at all? Demand legislation that meets their approval? In other words, act exactly like the Republican/Teabaggers?
    Just a question, but do your parents know you're using the computer?

  • Schtick on July 28, 2011 3:05 AM:

    Doug on July 27, 2011 10:27 PM:
    Just a question, but do your parents know you're using the computer?

    Just a question, but do you always have to insult people like a teabagger would just because you disagree with them?

    And perhaps I would rather the dems not negotiate budget items with the debt ceiling as they are two completely different items that shouldn't be together to begin with as I stated in the comment I made.

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