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With the bombshell announcement of a freeze in net Federal discretionary spending on many domestic programs tonight, much confusion (and outrage) has ensued.  It seems to me that it would be useful, at this point, to take a look at what this might actually mean.

President Obama is proposing a freeze on discretionary spending levels outside of spending on the Pentagon, foreign aid, the State Department, the Veterans Administration and homeland security.  Total non-defense discretionary spending in 2011 is projected by the Office of Management and Budget (PDF) to be $641 billion in 2011.  This represents 17.7% of the total projected 2011 Federal budget.  However, of that $641 billion, Homeland Security is projected to account for $42 billion, the State Department $56.3 billion, and Veterans Affairs $54.5 billion.  That leaves $448.2 billion which will be frozen, or 12.05% of the total projected 2011 Federal Budget.

What makes up the major elements of the nearly $450 billion that will be frozen?  $26.7 billion is the budget for the Department of Agriculture (including farm subsidies), $53.6 billion is the budget for the Department of Education, $26.5 billion is the Department of Energy, Health and Human Services is $84.3 billion, Housing and Urban Development is $45 billion, the Department of Justice is $27.8 billion, Transportation is $61.4 billion, the EPA is $10.6 billion, NASA is $18.6 billion and the Social Security Administration is $10.3 billion.  Much of the Energy and Justice budget is highly unlikely to be targeted, so the bulk of the savings will have to come from Education, HHS, HUD, Transportation, the EPA, NASA and SSA.

The first question to ask is whether these freezes will result in meaningful deficit reduction.  The answer on first approximation seems to be no.  Projections for the budget deficit in 2011 run between $750 billion to one trillion dollars.  Michael Linden at the Center for American Progress points out that using the most conservative figure for the future budget deficit means that these spending freezes will reduce the deficit by less than five percent.  Indeed, the total discretionary spending budget detailed above is only half of the budgetary cost for interest payments on the national debt in 2011!  At best, these freezes will amount to a drop in the bucket of our projected deficit, and will do nothing to reverse the unsustainable debt spiral that our Federal government is on the verge of entering.

However, even though it will not make much difference on the deficit, reasonable observers will point out that there is plenty of fat in the discretionary budget that deserves to be cut.  However, as Matthew Yglesias points out, much of that fat is the most difficult to eliminate politically:

To try to game this out, let’s assume that Obama is really serious about tackling weak claims rather than weak claimants. That means you’ll see a proposal for drastic, politically unrealistic cuts in farm subsidies while keeping in place growing funding for useful things like community health centers. So what happens when that hits congress?

Scenario one is that self-proclaimed deficit hawks like Kent Conrad turn out to like farm subsidies, decline to implement those cuts, and pass a budget that doesn’t actually freeze spending. Then Obama gets to chide them, and say it’s not his fault congress is so spendy.

Scenario two is that self-proclaimed deficit hawks turn out to like farm subsidies, and Obama launches a big political crusade on behalf of his cuts, threatening to veto anything that doesn’t come close to the spirit of what he’s proposing. That would be . . . interesting.

Scenario three, the really troubling one, is that self-proclaimed deficit hawks turn out to like farm subsidies, and Obama draws a line in the sand over the concept of a freeze, while being flexible about the details. Under that scenario, the weak claims don’t get cut and instead the politically powerful need to bear the brunt of the burden of a tactical political gambit.

Last, though probably least likely (call it Scenario Q) the administration has actually tried to draw up what it thinks is apolitically realistic list of spending cuts that doesn’t touch the most famously untouchable areas of the budget. I don’t even have any idea what that would look like.

Neither do I.  Much of the waste in the discretionary budget has endured for so long because it is so politically popular.  Indeed, the political popularity of this spending has already resulted in pushback from Congress, with House Dems rejecting the proposal.  Which means that we will either see President Obama forcing Congress in an election year to make very unpopular decisions, the failure of this proposal, or cuts primarily to those programs which have the weakest political constituency.

Meanwhile, economist Brad DeLong lays out the impact on GDP and potentially on employment that even such minor cuts can have:

What we are talking about is $25 billion of fiscal drag in 2011, $50 billion in 2012, and $75 billion in 2013. By 2013 things will hopefully be better enough that the Federal Reserve will be raising interest rates and will be able to offset the damage to employment and output. But in 2011 GDP will be lower by $35 billion--employment lower by 350,000 or so--and in 2012 GDP will be lower by $70 billion--employment lower by 700,000 or so--than it would have been had non-defense discretionary grown at its normal rate. (And if you think, as I do, that the federal government really ought to be filling state budget deficit gaps over the next two years to the tune of $200 billion per year, the employment numbers are more like 3.3 and 3.7 million in 2011 and 2012, respectively.)

So we're talking about an employment drop of over half a million before the next Presidential election from this policy, if DeLong is correct.  While this proposal seems to not exclude a jobs bill and even a potential second stimulus, those losses will be quite real.  In both a conventional analysis and a political calculus, it is hard for me to see how the gain of a 5% decrease in the budget deficit is enough to offset those losses.  Fulfilling the promise of a freeze in non-security discretionary spending also causes political problems for the two forms of stimulus which the CBO recently determined would have the greatest impact in 2010 and 2011 – increasing unemployment assistance and providing aid to state governments for purposes other than infrastructure.

But Obama can at least rest assured that this proposal will garner him accolades from deficit hawks?  Not so much.  The libertarian Reason Magazine has this to say:

What I do doubt, after a year of watching him, is that he truly believes in his heart of governing hearts that this is a virtuous or workable path, or that he's particularly concerned with the considerable gap between what he promises and what he delivers. Presidents, including the last guy, whatshisname, always promise deficit-reduction in every State of the Union Address. We still haven't quite launched that Mission to Mars. I will be happy–and at this point, shocked–to be proven overly skeptical.

Perhaps the most damning commentary is from The Economist:

Through bad times and good times for the president, there was one word I never associated with him and his approach to the challenges facing the country: gimmick. But this is a bright shining gimmick that advertises a lack of seriousness to both near-term economic weakness and long-run budget problems. This is decidedly not what is needed right now. If this is the best the president can do, Democrats, and the country, are in for a very long few years.

Their headline?  President Obama Concedes Defeat.  We cannot afford to kid ourselves.  This has every appearance of being bad policy and even worse politics.

Originally posted to Jay Elias on Mon Jan 25, 2010 at 08:38 PM PST.

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Comment Preferences

  •  Thank you for reading (37+ / 0-)

    I felt that it was useful for me to add to the conversation on this issue.  I do not intend to panic, nor will I be abandoning the party or President Obama.  Nor do I think that reducing spending isn't important, or that the deficit and Federal debt isn't a major issue, as those of you who know me can attest.

    But this is the rare occasion when I agree with the most progressive among us.  And that, to me, means something - this is a problematic idea that seems to get worse, not better, the more the details emerge.  And we need to face that, at least as a possibility, as quickly as we can.

    The urge to save humanity is almost always a false face for the urge to rule it. ~ H.L. Mencken

    by Jay Elias on Mon Jan 25, 2010 at 08:38:08 PM PST

  •  Excellent diary but (3+ / 0-)
    Recommended by:
    wader, Jay Elias, HoundDog

    social security is excluded.

  •  Excellent piece Jay (8+ / 0-)

    I agree 100%; it's bad policy and bad politics, which is astonishing. It doesn't actually do anything about the deficit except make the administration's economic policy look like a gimmicky hack job, and Delong's analysis paints a chilling picture about the potential effects.

    Why is it that supposedly smart people can't figure out that when you're running large deficits at a time of large unemployment, step one both for the economy and the budget is to get people back to work? What in the hell is so complicated about that?

  •  If It Is Politically Popular, Is It Waste? (1+ / 0-)
    Recommended by:

    I mean, if this is how people want to spend their tax money ...

    Libertarian is another word for teabagger.

    by bink on Mon Jan 25, 2010 at 08:49:45 PM PST

    •  Follow Up (1+ / 0-)
      Recommended by:

      I don't think that this is a disaster.  But it certainly doesn't seem to aid the country in its current crisis.  The political benefits to the White House and Congressional Dems also seem sort of nebulous ... I mean, who is this for?

      The Republicans?  The Village?

      Libertarian is another word for teabagger.

      by bink on Mon Jan 25, 2010 at 08:52:10 PM PST

      [ Parent ]

    •  By politically popular... (5+ / 0-)

      ...I mean in a more targeted sense.

      Most people don't like farm subsidies for example.  But the people who do live in certain states and Congressional districts do, so while as a nation we might oppose them, many Congresspeople and Senators support them.  Think about how difficult killing the F-22 was.

      The urge to save humanity is almost always a false face for the urge to rule it. ~ H.L. Mencken

      by Jay Elias on Mon Jan 25, 2010 at 08:52:52 PM PST

      [ Parent ]

      •  Subsidies Are a Bit Weird (0+ / 0-)

        Because of the way they affect trade.  But other spending that might seem non-essential, is it possible that it's harmless or might actually incur some benefits that we don't think about?

        Libertarian is another word for teabagger.

        by bink on Mon Jan 25, 2010 at 08:54:39 PM PST

        [ Parent ]

        •  It all depends (2+ / 0-)
          Recommended by:
          HoundDog, jayden

          I'm sure that I could find loads of cuts in discretionary spending I would find beneficial in the larger sense (nice sig line, btw - are you trying to hurt my feelings?).  But any political or even overall benefit from those cuts would offset from the loss of 500,000-700,000 jobs.  I mean, you can make a case against NASA entirely.  But that doesn't mean there isn't a short-term cost to eliminating it.

          The urge to save humanity is almost always a false face for the urge to rule it. ~ H.L. Mencken

          by Jay Elias on Mon Jan 25, 2010 at 08:57:31 PM PST

          [ Parent ]

          •  I Have to Confess (6+ / 0-)

            That the whole concept of wasteful spending seems more fuzzy to me the more that I look at it.

            I guess the most wasteful spending in my eyes would be that which 1) does not provide essential services like for defense, education, health care and retirement security and 2) has a very low GDP multiplier.

            The zillions that we have pumped into Wall St., for example, have no social utility and no GDP multiplier.  Heh.  Whereas an OMB analysis was able to tell us exactly what parts of the recent Recovery spending provided the most benefit in GDP terms.

            I'm also aware that some spending provides benefits that are not calculable by any means -- for example, those that preserve wilderness lands or National Parks.

            Libertarian is another word for teabagger.

            by bink on Mon Jan 25, 2010 at 09:04:15 PM PST

            [ Parent ]

            •  That seems like a good utilitarian way... (1+ / 0-)
              Recommended by:

     look at it.

              But one point I'm trying to make is that present utility is discounted in a long-term utility picture.  Some of these government jobs might not be truly "needed".  But the time that cutting them would cause the most pain is now.

              The urge to save humanity is almost always a false face for the urge to rule it. ~ H.L. Mencken

              by Jay Elias on Mon Jan 25, 2010 at 09:06:29 PM PST

              [ Parent ]

            •  forgot one thing... (0+ / 0-)

              ...actually a couple of things.

              "The zillions that we have pumped into Wall St., for example, have no social utility and no GDP multiplier.  Heh.  Whereas an OMB analysis was able to tell us exactly what parts of the recent Recovery spending provided the most benefit in GDP terms."

              The zillions we pumped into Wall Street also have no accountability to the taxpayers whatsoever. Don't believe it? Just watch them sit in those hotseats with their white knuckles, looking like ex-AG Mukasey trying to explain to Wexler that waterboarding wasn't torture! There's no new statutory regulations WITH TEETH to prevent another meltdown. We took the word of liars & thieves, casino gamblers, incompetents, and robber barons and got no quid pro quo in return-only an admonition to just trust them and everything will be ok.

              And as far as TARP goes, the Banksters got all of this free taxpayer money to shore-up banks "too big to fail", so they can turn right around and lend it back to us at usurious interest rates? Sounds like the greatest transfer of wealth in US history to me.
              Now I think I understand why professor Paul Krugman called Geithner's plan "zombie economics". No matter what we do they keep coming back for more and more money--they just won't die!

              "Peace is the protector of genius. War is the mortal enemy of both peace and genius."

              by ImpeachKingBushII on Tue Jan 26, 2010 at 12:01:58 AM PST

              [ Parent ]

      •  You should clarify that point. (8+ / 0-)

        The F-22 was extremely “politically popular” by your formulation, if I'm not mistaken. (You might want to think of a different term; “popular” implies that people like it. Something connoting untouchable might do it.)

        “If I can't dance to it, it's not my revolution.” — Emma Goldman

        by Jyrinx on Mon Jan 25, 2010 at 08:54:44 PM PST

        [ Parent ]

        •  in WW2 the German tiger tank... (0+ / 0-)

          ...was the Raptor of its day. It took upwards of 10-20 Shermans to dispatch one Tiger. The F-14 Tomcat, compared to the Raptor was the Sherman of its day. The F-14 was reliable, accurate-and deadly, just like the Raptor. It could lock-on to up to 6 targets simultaneously. The difference: the Tomcat cost $35 million a copy, the Raptor roughly 3 to 4 times as much per copy. How do I know that it was a mistake to retire the Tomcat in favor of the Raptor? Because I was in charge of the weapons systems on 35 F-14's for three years. The pilots and ground crews loved the Tomcat.

          It was a thing of beauty to behold. When they announced its retirement, it was a very sad day for me because while it was at the tip of the spear, America could sleep well at night knowing that the F-14 was always "locked and loaded for bear". I can still hear those after-burners on the flightline as the vibration coursed through my body, and when that 20mm cannon spoke, those 876 rounds of high explosive incendary rounds she carried, would make the bravest enemy pilot think twice before going into harms way toe-to-toe with a Tomcat!

          "Peace is the protector of genius. War is the mortal enemy of both peace and genius."

          by ImpeachKingBushII on Tue Jan 26, 2010 at 12:22:05 AM PST

          [ Parent ]

  •  Agree with you Jay. (6+ / 0-)

    Anyone following this issue knows what a disaster this "stunt" (and that's what it is) is.

    I'll add Nate Silver's take:

    And Kevin Drum's:

    Almost everyone whose opinion I respect in the Democratic blogosphere is against this and I think for good reason.

    Donate to the World Food Program's Haiti Relief Fund here

    by Me on Mon Jan 25, 2010 at 08:50:04 PM PST

  •  Just think of the savings (5+ / 0-)
    Recommended by:
    badger, chuckvw, HoundDog, jayden, efraker

    and real help to voters, if Obama had instead decide to spend his political capital on expanding Medicare or better yet Single Payer Heath Care. Not to mention the good will to the Democratic Party.

    ............................ The Public Option IS the compromise.

    by ctsteve on Mon Jan 25, 2010 at 08:50:42 PM PST

  •  I wonder if they aren't trying to anticipate (2+ / 0-)
    Recommended by:
    rainmanjr, Jyrinx

    an economic recovery and are trying to benefit from it before it comes to pass. "We'll make you a promise now that we'll cut spending by this much once things start to recover."

    Still doesn't make this a smart idea..

  •  Thanks for the analysis... (3+ / 0-)
    Recommended by:
    HoundDog, rainmanjr, jayden

    Now I am both better informed and even more depressed.....

    Love is the lasting legacy of our lives

    by princesspat on Mon Jan 25, 2010 at 08:55:18 PM PST

  •  We won't really know until Wednesday (2+ / 0-)
    Recommended by:
    my pet rock, HoundDog

    I'm as anxious for detail as anybody else, but right now its just too speculative for me.

    I'm not even clear on what all is on the table - I just hope he doesn't cut any social spending.

    I have more faith in this president than that though; he wouldn't take from the needy at a time like this.

    "Any plan I sign must include an insurance exchange ... including a public option" President Obama, 7.18.09

    by efraker on Mon Jan 25, 2010 at 08:56:43 PM PST

  •  The semantics is what's really bugging me. (6+ / 0-)

    I mean, evidently it's a freeze, but it is in no way analogous to something freezing. You can't take a bucket of water and only freeze a few bits here and there; a “freeze” in any context is a categorical halt to activity, not a careful trimming of excess.

    That's the way the words “spending freeze” have always been used — to indicate an actual, you know, freeze in spending. I suppose “budget freeze” might make sense — since it's the budget numbers that remain in place, not the money that the government would be spending — but that's not what they're saying.

    (Goddamn it, will they get over themselves and hire Lakoff already? You know, a leading expert in how people react to different words?)

    “If I can't dance to it, it's not my revolution.” — Emma Goldman

    by Jyrinx on Mon Jan 25, 2010 at 09:00:43 PM PST

  •  Forest Service is Dept of Ag (8+ / 0-)

    Thanks for the write up, Jay. The US Forest Service is located in the Department of Agriculture, and is often overlooked. It is not fat and is barely breathing. Huge land management agency for National Forests that was broken down under Reagan, Bush, Bush-Cheney.

    Always hit hard by Presidents and their non defense budget freezes. Only now implementing resource projects that have been put off for 10 or 15 years due to budget unavailability. Now if he freezes it again, it will be a disaster, with projects half-way done, and no follow up. A spending freeze is usually a terrible detriment to natural and cultural resources.

    •  The most likely effect (0+ / 0-)

      will be to increase firefighting costs, and larger fires destroy assets (timber, trails) and harm tourism revenues. I'm not sure how firefighting budgeting is done now, but it's usually funded through some mechanism that's unlimited but robs other parts of the USFS budget.

      In addition, Tester has introduced a bill for restoring part of MT forests (and adding a lot of new wilderness) and Wyden is working on a similar bill to cover all of OR (no new wilderness, but strong old growth preservation). Both bills mandate USFS develop and execute more restoration projects.

      They're actually very good bills, which gives them little chance of passage already (both big timber and big environment will likely oppose them), and budget constraints like the ones proposed will probably kill the bills altogether in the near term.

      Bitte sag mir wer das Märchen vom Erwachsen sein erfand

      by badger on Mon Jan 25, 2010 at 11:54:53 PM PST

      [ Parent ]

  •  Well written and researched. Thanks Jay (2+ / 0-)
    Recommended by:
    Jay Elias, jayden

    The means is the ends in the process of becoming. - Mahatma Gandhi

    by HoundDog on Mon Jan 25, 2010 at 09:08:12 PM PST

  •  Good diary (3+ / 0-)

    I hate all the "HOOVER!" diaries, but this one is much better than that. If one deserved to be front-paged, this one would have been a good choice.


    Anyway: one problem is that the details aren't there yet, and that most input so far is being provided by people who don't like it (but who don't have all the details either).

    A "freeze" for a few years isn't really all that unusual to my European ears, and not necessarily bad. I can see the point that it sounds gimmicky, as it has a relatively small impact. It seems like a bit of a pander to me, but then again, the NYT article states that this has been under consideration since last year, which seems to rule out a panicky pander to get voters back.

    I'll just see what the proposal actually is.

    •  Part of the problem... (1+ / 0-)
      Recommended by:
      jayden that the details can't be made available that easily - the proposal will go forward at the SOTU without being able to tell us how much is getting cut from what.  Unless, as Yglesias points out, they have a secret plan of what they want cut that they aren't leaking yet.

      The urge to save humanity is almost always a false face for the urge to rule it. ~ H.L. Mencken

      by Jay Elias on Mon Jan 25, 2010 at 09:32:00 PM PST

      [ Parent ]

      •  A deal crafted with the necessary (3+ / 0-)
        Recommended by:
        Pescadero Bill, Jay Elias, jayden

        Congressional committees and sub-committees that has not already been leaked seems unlikely.  This has at least the appearance of seat of the pants strategizing.  And appearance, particularly now, is everything. - Kicking against the pricks since '98!

        by chuckvw on Mon Jan 25, 2010 at 09:46:45 PM PST

        [ Parent ]

  •  Appreciate the diary. (5+ / 0-)

    Since there are still conflicting accounts of what this may actually entail, I'm going to wait until a plan is announced, but I appreciate that - as usual - you're presenting the material in a sober and informative way.

    Saint, n. A dead sinner revised and edited. - Ambrose Bierce

    by pico on Mon Jan 25, 2010 at 09:31:03 PM PST

    •  Thanks... (2+ / 0-)
      Recommended by:
      pico, jayden

      ...I guess I'm just finding it so weird to be on the side of not reducing spending I felt compelled to figure out why.

      The urge to save humanity is almost always a false face for the urge to rule it. ~ H.L. Mencken

      by Jay Elias on Mon Jan 25, 2010 at 09:33:26 PM PST

      [ Parent ]

      •  Well, if the plan to reduce is anything like (4+ / 0-)
        Recommended by:
        chuckvw, Jay Elias, jayden, skymutt

        what's being explained here, I'm not all that surprised: it'd be a gimmick that fails to reduce spending in any meaningful way, while putting the strain on the kinds of departments that really can't afford it.  I'm just surprised to go away to dinner and find the entire rec list taken up with some really passionate (but not terribly informative) fighting about a policy whose contours aren't all that clear yet.  

        Heh, or maybe I'm not.  

        Saint, n. A dead sinner revised and edited. - Ambrose Bierce

        by pico on Mon Jan 25, 2010 at 09:43:31 PM PST

        [ Parent ]

  •  Obama has less to worry about 3 years from now (0+ / 0-)

    ...than Congressmen and Senators up this fall have to worry about.

    While the attributable job short-fall -- "those losses will be quite real" -- over the life of the out-year-loaded "freeze" may be mathematically discernible, they're gonna be buried in a general expansion by the time Obama's up again.

    This November there's gonna be no hiding the jobs picture, and this "freeze" will have little to nothing to do with THAT.

  •  Collecting bargaining chips (1+ / 0-)
    Recommended by:

    Yes, Congressman, I know that downtown redevelopment is important to the folks in your District, but, you know, we have a spending freeze.....

    Oh! Now you want to help me get the Afghan War appropriation through? We can work something out. Get with Rahm on the details. Been a pleasure Congressman.

    I am not currently Licensed to Practice in this State.

    by ben masel on Mon Jan 25, 2010 at 11:25:08 PM PST

  •  Quality writing. (0+ / 0-)

    I am glad to see you around here more often here lately.

    If nothing is very different from you, what is a little different from you is very different from you. Ursula K. Le Guin

    by northsylvania on Tue Jan 26, 2010 at 12:39:07 AM PST

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