CBO Scores the Reid and Boehner Plans

Update: CBO has just released its own comparison table of the Reid and Boehner plans, where it now breaks out the war and non-war interest savings under Reid's plan. This blog has been updated from its original posting to reflect the new numbers.

 

With the August 2 deadline approaching, Speaker Boehner's (R-OH) and Senate Majority Leader Reid's (D-NV) plans--or some variant--seem like the last ticket out of town. CBO has recently scored both plans (Boehner's and Reid's), showing that they save slightly less than the two had been claiming.

In this sense, neither leader should be accused of using a sleight of hand. The reason for the smaller savings is that they were unable to incorporate the effects of the final CR into the baseline they were measuring against. That alone knocks out about $200 billion of their savings from the discretionary spending caps.

Since the bills are easily comparable, we have presented the savings from sections of the bill side-by-side in the table below. Additionally, we have also separated out the savings that Reid gets from the war drawdown.

Ten Year Savings Under Boehner and Reid Plans (billions)
Provision Boehner Savings  Reid Savings
Discretionary Spending Caps -$756 -$752
Cap Adjustments for Program Integrity $15 $51
Subtotal, Discretionary Caps -$741 -$701
     
Program Integrity Savings -$16 -$18
Pell Grants $17 $18
Other Education -$22 -$18
Agriculture Programs $0 -$11
Subtotal, Mandatory -$20 -$29
     
Revenues (Program Integrity)* $0 $43
     
Interest Savings -$156 -$153
Total -$917 -$927
     
War Savings $0 -$1,044
Interest Savings $0 -$223
Total Including War -$917 -$2,194

*Reid program integrity includes $14 billion above the baseline for IRS efforts aimed at increasing tax compliance. Savings from this score as increased revenues of $43 billion.

On an apples-to-apples basis in which you ignore war savings, the plans would save $917 billion (Boehner) or $927 billion (Reid).

(Note: The outlay caps were in the original Boehner plan. The revised plan does not include outlay caps, which increases the savings from the discretionary spending cap total by $46 billion. In the original Reid bill, language on tax compliance was unclear, causing CBO not to score an increase in revenue. The updated Reid plan fixed the language, yielding $43 billion in added revenue from the IRS program integrity efforts. The below analysis on the two problems was written in reference to the original plans.)

There are a couple of interesting things that those savings numbers show. First, CBO scores outlays in 2012 and 2013 as $44 billion lower in the Reid plan than in the Boehner plan, despite nearly identical budget authority totals (and actually $2 billion higher for Reid). That is what causes Reid's discretionary caps to score higher savings. Why? Because the Boehner plan has explicit outlay caps in 2012 and 2013 to accompany his caps on budget authority -- outlay caps which are higher than the levels CBO would project outlays to be for those years under just the budget authority caps. So by setting outlay caps on top of his budget authority caps (which one might think would reinforce savings), Boehner actually loses $44 billion in scored savings. The assumption CBO is likely making is that appropriators will hit the outlay caps, even if it means having a different mix of appropriations than they otherwise would have.

Second, Reid's plan includes $20 billion in increased outlays for program integrity efforts at the IRS for activities to improve tax compliance. In theory, this $20 billion would help the IRS increase collections by reducing the tax gap, but CBO hasn't included any increased revenue as savings. CBO writes that "even if the base amounts specified in the bill are appropriated, there is no assurance that the amounts available for enforcement activities would be at least equal to the amounts projected in CBO's baseline." This basically means the Reid bill doesn't have scored savings from increased tax enforcement because there is no assurance that the bill even includes increased tax enforcement. CBO does assert that if the right accounts do receive increased funds as the Reid plan intends, there would be increased revenue as a result -- they just can't score it as it currently stands. For frame of reference on what savings could look like if done correctly, the President's proposal to spend $13 billion over the next decade on program integrity efforts to improve tax compliance was scored by CBO as saving $42 billion through 2021.

As the CBO scores of the plans show, the Reid and Boehner proposals as they currently stand are closer in savings than reports and especially talking points would have you believe. We suspect there will be an updated Boehner plan soon, since he has apparently started working on a new bill that would keep his promise of cutting more than he raises the debt ceiling (since his savings estimate came back lower than he expected). But for now, this is our best measure of the two fiscal plans that will likely form the framework for agreement on a debt limit increase -- and the fact that they seem on the same page in terms of savings suggests that a compromise proposal isn't far off.