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2011 Budget Cuts Compromise Revealed

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I personally think this whole debate on cutting the budget is a little silly, especially now, and that both parties are to blame. On one hand, it’s a little disingenuous for the Republican party to demand lower spending when we had massive spending bills during the Bush Administration. On the other, the 2011 budget should’ve been settled last year when Democrats had control of both chambers of Congress. That said, we are where we are and here are the nitty gritty details of the budget compromise reached last week.

The budget cuts are to cut spending by $40 billion (the fiscal year ends in September 30th) and it is the largest biggest cut made in a single year, made even more stunning by how little time we have left in the year (less than six months until October 1st). Part of the $40 billion is covered by $12 billion in reductions that started at the beginning of the fiscal year, Oct. 1, 2010; but the remaining $28 billion starts now(ish).

If you’re curious to see them all, CNN Money compiled a list and has offered some commentary here.

It seems like there’s a lot of penny pinching here or there but not much attention paid to the biggest pieces of our spending. Case in point: The Pentagon would receive $5 billion to be partially offset by $4.2 billion in eliminated military earmarks, with the difference made up elsewhere. I’m all for making sure we’re supporting our troops but there can be some belt tightening in the development efforts (rather than support/operations). When you look at a family budget, you don’t save much when you ask the kids to take an allowance cut.

What do you think about all this?

{ 48 comments, please add your thoughts now! }

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48 Responses to “2011 Budget Cuts Compromise Revealed”

  1. harry c says:

    I really don’t like the fact that we can be all the way into April, and the budget for 2011 still hasn’t been settled. Would it be a good idea to hold pay from all of congress/senate until the budget is finalized if it takes longer than Jan. 1? Would this even matter to them?

    Anyways, I think we need to make cuts in the areas where we spend the most. In the grand scheme, things like planned parenthood don’t cost the government much to run. But putting $500 billion into the military when no one is even close to us technologically, military power, etc. just doesn’t make sense anymore…

    • Jim says:

      I really feel for DC residents because they lost a lot of things in this “compromise.” It could also be because I live so close, it’s been on our local NPR stations almost non-stop.

    • Courtney says:

      Harry, I agree. All I hear from the GOP is that they’re going to cut the “fraud, waste, and abuse” – ummmm, don’t you think if you’re looking for fraud, waste, and abuse, you’re going to find most of it a) in the biggest part of our discretionary spending, b) by an agency that hasn’t been audited in decades and MIGHT be audit-ready in 2017, if they feel like it?

      (Hint – the answer to a) and b) is the Department of Defense)

  2. mannymacho says:

    End the ethanol subsidy. Boom. $6 billion saved, with little effect on production.

    • uclalien says:

      Given that these subsidies have caused the price of corn to skyrocket, it’s also the humane thing to do. People are going without food because of this policy.

      Not to mention the fact that:
      1) it’s a horribly inefficient substitute for gasoline;
      2) it does more damage to the environment than good; and
      3) it’s a horrible waste of tax dollars

      Few people realize that the US taxpayer is currently subsidizing the production of corn while simultaneously subsidizing other farmers take corn land out of production. In what world does this make sense?

  3. I agree with your sentiments regarding both parties. Lots of blame to go around.

    As painful as these cuts seem to some, they are really the equivalent of spitting on a wildfire. Entitlements have been allowed to grow to such an excessive level, and require a mind-boggling amount of debt to sustain, that I don’t see a realistic path out without steep tax increases AND drastic cuts – and neither party will agree to both measures.

    As a fiscal conversative, but a reasonable one, I’m willing to pay my “fair share” of taxes, but would like my tax dollars to be spent responsibly.

    The federal government should return to its constitutionally-granted limits on spending (types of spending). Many of the programs above and beyond that are nice to haves, but they are not constitutional and should be funded by state/local governments, private charity, etc.

    The problem is that once these things are “out there,” its impossible to get them back in the box.

  4. Wen says:

    While it is a bit disingenuous, you can’t really compare spending under the current administration against the spending of the previous administration. The current spending is sooo much higher, that both sides should be frightened, especially given the fact that countries around the world are defaulting for real.

    Its not a hypothetical outcome.

    • Aaron says:

      The spending by the current administration you must admit has been setup by the previous administration and circumstances beyond the administration’s control. The current administration can’t just up and leave Afghanistan and Iraq because of budgetary issues. Factor on top of that temporary spending in the form of economic stimulus, which desperately needed to be done, and that explains why the current administration could not spend less than the previous administration, even if it wanted to.

      The previous administration however did make policy choices that weren’t necessary that drove up spending. Senior prescription drug coverage, tax cuts to stimulate the economy which were extended beyond the recession of the early 2000′s, No Child Left Behind, and the invasion of Iraq all were policy choices not pushed on the previous administration. To be fair, I don’t blame the previous administration for deficit spending to increase homeland security following 9/11, nor the institution of the Bush tax cuts early on as an economic stimulus. But the others above like it or not were clear choices where the previous administration absolutely did not have to pursue.

      • Texas Wahoo says:

        Obviously neither president HAD to spend as much as they did. Bush didn’t have to go to war in Iraq. Obama didn’t have to increase the spending in Afganistan. Obama didn’t have to go to war in Libya. Bush didn’t have to cut taxes. Obama didn’t have to pass a huge stimulus bill and tons of funding for faster trains. They did them because they thought they were beneficial for the country. I think Wen’s point was that spending in the last couple of years has been way above what it was under the last president.

        • Aaron says:

          We’re already in Afghanistan. The invasion of Afghanistan was already in place before Obama took office. Bush didn’t have to invade Afghanistan either if you want to split hairs. However, I’m trying to be fair to both. I don’t know all the particulars as to why additional funding is needed in Afghanistan, but it appears military commanders who are not partisan are calling for that funding to get the job done. I don’t blame Obama or Bush for Afghanistan. After 9/11, I think most people agree we should have gone in, and leaving prematurely is going to leave us potentially vulnerable again. So I take Afghanistan off the table for both administrations. It happened unexpectedly, and that’s one of those things you have to do even if the funding isn’t available immediately. Yes, Libya won’t help the deficit, but probably another day of involvement in Iraq probably costs the same as the entire US operations in Libya, too.

          The economic stimulus after the financial meltdown also falls into that category of “no other option but this”. Once the meltdown occurred, it had to be done. To not institute stimulus in that situation flies in the face of lessons we learned going back to the Great Depression, and would have lead to another depression rivaling the 1930′s. I lump that under “had to be done”, and keep in mind stimulus and bailouts began while Bush was still in office. That’s to Bush’s credit as well as Obama’s.

          Here’s what we do know: the Bush administration record deficit spent in a time of unprecedented growth that actually contributed partly to the financial collapse. That was the time to cut spending and/or raise taxes. And yes, Democrats are to blame, too, as they weren’t about to favor any gov’t spending cuts either.

          Will Obama also deficit spend once we get the economy going again? We’ll see. It’s too early to pass judgement on this administration as far as the national debt and deficit reduction. You simply can’t run a balanced budget or surplus in the current economic climate unfortunately.

          FYI, this is coming from someone who is overall disappointed with the Obama administration so far. I also believe Bush Sr. was the best president we’ve in the last four decades (including Reagan). I’m not ideologically attached to either side.

  5. qixx says:

    My vote goes for no spending until a budget is passes every year. If no government spending is allowed then i guarantee the budget will be finalized on Oct 1st every year. No senator or legislator would get paid. Nobody gets paid and their would be real pressure to get it done.

    • zapeta says:

      I agree completely. I was really mad when I heard that if the gov’t were to shut down that Congress would still get paid. They don’t have any problems passing a bill to make sure they get paid!

      I feel like these cuts are a joke. All that time arguing about the little bit of money that goes to Planned Parenthood and NPR. If we want to reduce the deficit, getting out of two wars and ending the Bush tax cuts would be a good start, but nobody is talking about that.

      • Texas Wahoo says:

        “getting out of two wars” – I believe that should be three wars now, right?

        • cubiclegeoff says:

          Don’t think our involvement in Libya would be considered a war, especially considering what little we are actually doing there.

          • mannymacho says:

            I think that interfering with a Civil War with air strikes is a war, whether we were really on the ground or not. In any case, none of it was authorized by congress and (back to the point of this post) it is pretty darn expensive…

          • Aaron says:

            Completely agree. When speaking about government spending, saying Libya is equal to Iraq or Afghanistan is absurd. This isn’t to say we should be involved in Libya. It’s just not fair to equate them economically.

          • Texas Wahoo says:

            Aaron, who said Libya is equal to Iraq or Afghanistan? It has barely started. It is extremely expensive, but the costs will take a while to really pile up like Afghanistan.

        • NateUVM says:

          Especially when we’ve got no “real” assets on the ground or that we’ve withdrawn the bulk of our tactical assets. Sure will take a while for Libya to rack up the costs like Afghanistan.

          But should we be there? I dunno. It’s only one of those rare times when our stated priority (spreading freedom) lines up with our actual priority (money, vis-a-vis oil).

          Back to Afghanistan… Too bad the previous administration screwed up their priorities and directed resources AWAY from Afghanistan and towards Iraq. Maybe we wouldn’t have too commit more now to a situation that should’ve been the priority in the first place. Not the only mistake that administration made that we’re still dealing with now…

  6. sophomore says:

    Ummm … The current Federal debt ceiling is $14+ trillion and we are expecting to add ~$2 trillion this year. Arguing about $40 billion (this year only) is like spitting into a hurricane. Please learn the difference between million, billion, and trillion.

    • Strebkr says:

      Lots and lots of 0s.

    • mannymacho says:

      I think that was the point of the post…Congress is debating for hours over things that are really inconsequential. In order to make a real change, large hacks must be made across the board, and quickly.

      • skylog says:

        sadly, i will believe it when i see it. our political system is so warped right now, it is a miracle anything gets done. literally.

  7. Samir says:

    To help with understanding what “sophomore” is suggesting, chop off 8 zeroes from the numbers in question and see what happens:
    * annual spending: $38,190 (3.819 trillion)
    * annual deficit: $16,450 (1.645 trillion)
    * proposed cuts: $380 (38 billion)

    Source: [http://www.whitehouse.gov/sites/default/files/omb/budget/fy2012/assets/tables.pdf].

    Now imagine an individual that spends $38,000 every year, of which $16,500 comes from credit card debt. In response to a mid-year crisis, the individual decides to reduce spending by $380, so that the year-end total of credit card debt will be $16,120. What personal finance advice would you offer such an individual?

    • Courtney says:

      Go out and earn more money, while cutting expenses from the so-called ‘big ticket’ items.

      Passing billions of tax extensions that were never paid for and then cutting NPR funding while refusing to evaluate DoD spending, which makes up roughly 25% of our budget and hasn’t been audited in decades. Kind of like working a minimum wage job, living in a huge penthouse apartment, and then deciding you’re not going to go to Starbucks this week to balance your budget.

      Spend less AND earn more. Works for people, works for governments.

  8. Sun says:

    Capital gains at 35%. raise the income tax bracket back to 90%. they got us in this mess, they need to contribute to getting us out. Near interest free commercial paper while I pay for higher gas? I don’t think so!

  9. Ryan says:

    Why don’t the Dems agree to cut spending and the Repubs agree to raise taxes?

    Isn’t that considered meeting in the middle?

    • Aaron says:

      Ryan, I completely agree with you. If the deficit is that important, how could any deficit hawk not be in favor of raising taxes, and considering cuts to any government spending, such as defense?

      It kills me also that this compromise doesn’t fix anything. It doesn’t get us any closer to balancing the budget significantly, and it doesn’t stimulate the economy which would increase tax revenues, which in turn would help fix the deficit, too. It’s compromise for compromise sake, not something that makes any sense whatsoever.

      • Texas Wahoo says:

        One of the reasons a “deficit hawk” could not be in favor of raising taxes is because there is a line of thinking that raising taxes results in decreased production, thus decreasing the tax base, so the government doesn’t actually make any more money, the economy is just made smaller.

        • Aaron says:

          Conversely, entitlements give money to those who tend to spend it, so cutting entitlements could also shrink the economy because it reduces demand in the economy.

          A disproportionate number of “deficit hawks” though focus only on eliminating entitlements and not raising taxes. I’m not unilaterally against either tactic. I recognize both when done right can be beneficial, or conversely harmful when done wrong.

    • skylog says:

      it is so simple, i think it confuses many in washington. they are all playing their games, but any plan that does not cut spending annd raise taxes will not be the solution that is needed.

    • cubiclegeoff says:

      But politically, it’d be considered failure, at least in the minds of our politicians that can only think about reelection. They’re too stubborn and too concerned about the next election than to make real progress.

  10. cubiclegeoff says:

    One thing from this that I’m trying to figure out is what fiscal importance there is in taking the wolf off the endangered species list.

    • NateUVM says:

      1) Don’t have to spend money protecting it.

      2) Don’t have to limit economic activity that might threaten it.

      • Aaron says:

        Neither 1 nor 2 is of any significance economically speaking.

        Goes along with cutting funding for NPR to allegedly help balance the budget.

        • Texas Wahoo says:

          Of course, almost nothing in the budget is of any significance economically speaking when singled out. The whole point is to find things that you can save money on and do so. It’s the same reason people use coupons. That 35 cents might not have much significance in your overall budget, but if you get enough coupons, you can make a dent.

          • Aaron says:

            Look, the cuts on endangered species protection and NPR funding are ideologically driven, not driven from a true concern of the budget. Here’s how you know:

            If you found that you made $100,000 a year, but you were spending $50,000 more than you earned, rationally, how would you correct the problem? You categorize your expenses, and see what you’re spending most of your money on, and you then drill into those things first.

            Imagine if you conveniently looked at your budget, found you spent $100 a month on going out to eat, and you decided since you don’t like going out to eat so much, you’d focus significant energy on that, and didn’t look at your $10,000/mo mortgage because you love your house. It doesn’t matter how much you love your house, it’s got to go!

            The “every little bit adds up” doesn’t add up. Just google and find a federal spending pie chart. If you completely eliminated all wildlife protection funding, it wouldn’t make any meaningful dent in the deficit. We can talk about defunding NPR and wildlife protection once Social Security, Medicare, Medicaid, and Defense are addressed.

          • Texas Wahoo says:

            Obviously they’re ideologically driven – is there anything that isn’t? My whole point was that you have to make cuts from everything, big and small.

          • NateUVM says:

            Cosign Aaron. 100%.

          • Aaron says:

            @Texas Wahoo,

            http://en.wikipedia.org/wiki/File:U.S._Federal_Spending_-_FY_2007.png

            It’s not exact math since that’s 2010, but it kinda illustrates the point.

            If the deficit is $1,800 billion (to make it easier to add)…

            $660 – Discretionary
            $416 – Other mandatory

            $1,076 Billion, or $1.01 trillion

            IE, if we completely eliminated spending on everything but defense, social security, interest on the debt, medicare, and medicaid, we’re still in the whole.

            It doesn’t add up. Social Security isn’t the issue right now because we actually collect more than we disperse. So that leaves defense, medicare, and medicaid. Every minute we spend talking about NPR and wildlife preservation is wasted time until the above are addressed.

          • cubiclegeoff says:

            My problem is that the removal from the endangered species list should not be done by Congress ever, and it wasn’t done to stop any type of funding (which is less than minimal in the eyes of the budget). It was purely a non-money issue and should never have been included.

  11. Texas Wahoo says:

    “Social Security isn’t the issue right now because we actually collect more than we disperse.”

    Huh? Just because it collects more than it pays out right now doesn’t mean it’s not an issue. Cuting the payouts will still help the budget just as much as cutting anything else in the budget. It’s not like a business where we have to spend money to make money. If we eliminated the payouts alltogether, we could still just collect the tax.

    • Jim says:

      I agree, it’s all about acceleration of those payments vs. collections.

    • Aaron says:

      @Texas Wahoo & Jim,

      I didn’t say Social Security isn’t an issue. It must be dealt with in the long run to achieve long term debt reduction and to avoid future deficits. I said it’s not the reason, in other words a top or primary reason, for why we are deficit spending today.

      Translation: if we’re gonna cut spending to balance the budget today, the cuts will have to be in defense, medicare, and/or medicaid. My entire point is even talk about things like defunding NPR or wildlife protection is politically motivated, and won’t do good of any significance that’s worth even the time to discuss it.

      Cutting medicare or medicaid would be something the left would hate typically, where as defense is something the right typically would hate. I’m not concerned about either political ideology. I want to solve the problem, and by sheer basic math, the budget can’t be balanced without cuts to some or all of those if you’re relying on budget cuts alone. Drop the nonsense about defunding NPR, wildlife protection, Planned Parenthood, etc. It’s a distraction and only helps to enure the deficit isn’t actually going to be addressed.

  12. Dan says:

    “On one hand, it’s a little disingenuous for the Republican party to demand lower spending when we had massive spending bills during the Bush Administration.” Stupid.

    Where were the Democrats during the Bush administration? Hiding in Illinois?
    :)

    If you keep crapping in your pants, one day you will see the mess you are in.

  13. uclalien says:

    We need to stop fooling ourselves by referring to these spending increases as budget cuts. Year after year, the federal government budgets one number, then spends some amount that is much much larger. Not to mention the fact that spending has increased by trillions and we are only talking about “cuts” in the billions. Until we start talking real numbers, this is all a political show.

    • Aaron says:

      One point we all have to realize is one big reason for the deficits is a severe reduction in income tax revenues because of the financial collapse. There’s a very large portion that would never be made up from budget cuts alone.

      This is why I say the first goal is to recover the economy and get income tax revenues that would coincide with an economic recovery.

  14. uclalien says:

    I hear this all the time, but it doesn’t match up what is really occurring. The fact is that federal tax revenues did decrease by 18% between 2007 and 2009, BUT spending increased by 47% over that time period.

    So while a portion of the deficit has resulted from a drop in federal tax revenues, it isn’t as large a portion as you make it seem. A decrease in federal tax revenues only accounted for only 38% of the 2009 deficit (I explain the math below). Spending increases accounted for the other 62%. I have a hard time referring to 38% as “a very large portion.”

    Note: For easier comparison, all of the following numbers are inflation adjusted in 2005 dollars.

    Federal revenues and expenditures in 2007 were $2.420 trillion and $2.572 trillion, respectively. By 2009, federal expenditures had increased to $3.647 trillion. This means that even if revenues remained at their 2007 peak, the deficit would be $1.227 trillion and increases in spending would account for $1.075 of that deficit. Given that the actual inflation adjusted deficit in 2009 was $1.726 trillion, the drop in tax revenues accounted for 37.7% of the 2009 deficit.

    • Aaron says:

      Federal expenditures increased due to increased defense spending to pay for Afghanistan, and federal economic stimulus. The stimulus bills are temporary in nature and effectively one time expenditures. A spending reduction just from ending stimulus measures was already in the cards.


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