Not the Biggest Cut in History

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Pundits and politicians are all in agreement: Those were some big budget cuts in Friday night’s deal. “The largest annual spending cut in our history,” President Obama said. Speaker of the House John Boehner called it the “largest real dollar spending cut in American history.” Saturday’s front-page, upper-right headline in the Washington Post proclaimed:

BIGGEST CUTS
IN U.S. HISTORY

The story went on to say that Obama “said the cuts would be painful but necessary.”

NPR’s Andrea Seabrook reported, “The Republicans got big, big cuts.” “Slashing government,” agreed the Los Angeles Times. The Washington Post added the big picture:

an ascendant Republican Party has managed to impose its small-government agenda on a town still largely controlled by Democrats.

And in a separate story:

Obama and his party felt pressure to show they heard the message that many Americans believe the government spends too much and that deficits are unsustainable.

AP added:

Republican conservatives were the chief winners in the budget deal that forced Democrats to accept historic spending cuts they strongly opposed. Emboldened by last fall’s election victories, fiscal conservatives have changed the debate in Washington. The question no longer is whether to cut spending, but how deeply.

Please. It’s a cut of $38 billion in a budget of $3,819 billion. That’s 1 percent. That’s a rounding error in federal budgeting.

Have you ever seen people so self-congratulatory over such a minor accomplishment? Here’s one graphic representation of the budget cuts—showing the House’s original proposed cut of $61 billion—compared to annual spending and the annual deficit. Here’s another, depicting the $61 billion cut in the context of the rapid growth of spending over the past decade. In fiscal year 2001, which ended in September 2001 but was mostly set in place before President Bush took office, the federal government spent $1,863 billion. After seven years of Bush and a Republican Congress, spending was more than a trillion dollars higher—$2,983 billion in FY2008. Then the financial crisis, TARP, the stimulus, and the omnibus spending bill came along, and FY2011 spending is estimated at $3,819 billion—$836 billion more than just three years earlier, and $1,956 billion more than when Bush took office a decade ago.

So this cut—not of $61 billion but of $38 billion—is a lot of money anywhere except Washington. In Washington, it’s 1 percent of what the federal government will spend this year. It’s less than 5 percent of the three-year spending increase. It’s 10 percent of this year’s spending increase, the increase from 2010 to 2011.

Is it nevertheless the “the largest annual spending cut in our history,” as President Obama says? Not hardly. My Cato Institute colleague Chris Edwards notes:

This federal budget table shows total federal spending since 1901. Total spending fell in 22 years out of the last 110 years. In 19 of those 22 years, spending was cut by more than 1 percent.

And what about the downsizing of the federal government after World War II? That same budget table shows that federal spending fell from $92.7 billion in 1945 to $55.2 billion in 1946, to $34.5 billion in 1947, and to $29.8 billion in 1948 (and all without any of the job losses that we’re told would result from modest reductions today). Check out also the drop in spending from 1919 to 1922, even larger in percentage terms.

The president might be technically correct in this sense: In none of those years did federal spending fall by as much as $38 billion in nominal dollars. But any real comparison would use inflation-adjusted dollars or percentage of the budget, and by those standards there are no “big, big cuts” here. (Boehner specifically called it the “largest real [that is, inflation-adjusted] dollar spending cut in American history,” which is so clearly wrong that it must surely have been a misstatement.)

The fundamental point here is that federal spending rose by more than a trillion dollars during Bush’s first seven years, and then by almost another trillion in barely three fiscal years. And then we had a titanic battle over whether to trim $38 billion.

The idea that the Democrats “have shown that they heard the message that government spends too much” or that the Republicans—the party that increased federal spending by a trillion dollars while nobody was looking during the Bush years—have “imposed a small-government agenda on Washington” is ludicrous. After these meager cuts, the federal government will spend more than twice as much as it did when Bill Clinton left the White House.

Our present fiscal course is unsustainable, as experts across the political spectrum have told us. Projections in the 2010 Financial Report of the U.S. Government indicate that national debt as a percentage of GDP is on course to rise from 62 percent of GDP in 2010 to 130 percent in 2040. If there’s this much resistance to a budget haircut, how can we hope to agree on surgery that would actually reduce spending, balance the budget, and avert national bankruptcy?