The Timing of Savings

Several commentators have made the point that the President's budgetary savings are back end loaded.  I wanted to test this theory so I calculated the savings in each budget relative to the CBO baseline and the percentage of the savings that come in the first 5 years of the budget versus the second five years.  Frankly, it doesn't make much of a case for optimism about any of the forecasts.

First to set a baseline, let's determine the percentage of spending that comes in the first five years versus the last as a reasonable expectation of how the savings "should" come.  Using the CBO baseline, we get that 43.1% of the spending in the CBO baseline occurs in the first five years so a reasonable expectation is that 40 percent or so of the savings should come in the same time period.

So how do the different budgets do?  The Ryan budget comes closest to our 40 percent benchmark

In the Ryan budget, 32% of the savings come in the first five years.  In the Murray budget, the number is far lower, at 14%.  But the worse by far is in the President's budget where negative 9% of the savings come in the first five years, meaning the President's budget actually adds more to the debt over the next five years than is planned to be the case in the CBO baseline.

A budget that says more than 100% of the pain will come after you've left office isn't much of a budget at all.

The Democratic Plan(?)

Some of you are probably thinking, "Oh NO!  Not another post from somewhere on the fact that the President has never presented a plan to manage the deficit/debt."  Rest assured, this is not that post.  It is however inspired by the recent debt ceiling and downgrade news.  Basically, I started running the following thought experiment with myself.  Assuming that the Democrats in Congress actually wanted to reduce the projected debt increase by $4 trillion over the next 10 years, what would they put together to do so.  Having thought about it and invited comment from folks on the left, I've pretty much come to the conclusion that it isn't possible.  Let me explain how I got there.

How about a "real" baseline for spending?

One of the great frustrations in arguing about government spending is that everything government does is expressed relative to a baseline and, every time that government changes its mind about something, the baseline changes.  Since government is always changing its mind about things, the baseline is always changing, making it very difficult to understand what you are actually comparing a particular outcome to.

In addition, the whole notion of a baseline doesn’t really make a lot of sense when it varies all over the place.  To give you an example, when President Clinton submitted his 1994 budget, CBO projected spending growth of 3.4% per year as the “baseline”.  This in a period where inflation averaged between 1.5% and 3.0%[1].  In 2011, the CBO projected spending growth of 5.1% with inflation pegged at 1.8% for the entire period.[2]  Thus, the baseline is highly variable period to period and unrelated to the inflation or population in any particular way.

Rather, the baseline reflects what government would grow according to various agencies if government were simply to keep doing what it was doing without any focus on efficiency at all.  There is generally nothing in the assessments of baselines to suggest that any particular outcome driven by the government can be done more efficiently; nor is there any sense that income constraints exist.