House Speaker John Boehner's plan to raise the debt limit will reduce deficits by just $1 billion in 2012 and $851 billion over the next decade, according to the Congressional Budget Office. The news that the deficit savings are backloaded to occur in years that the current Congress has no control over is likely to increase doubts among House conservatives who were already skeptical about the plan.
In total, the plan would reduce discretionary spending by $695 billion compared to current projections for 2012 through 2021, cut mandatory spending by $20 billion, and save $135 billion in interest payments.
In 2012, the one fiscal year that the current Congress has full control over, discretionary spending is only supposed to go down by $5 billion. Those savings are projected to increase over time reach $112 billion in 2021. But the problem with relying so heavily on discretionary spending cuts rather than structural reforms to mandatory programs is that it's hard to bind future Congresses's into meeting the caps.
This report is likely to create much confusion and debate, because the office compares Boehner's proposal to multiple baselines. CBO issued one baseline in January, revised it in March, and made further revisions when Congress struck a deal to avert a government shutdown, which lowered the 2011 number. Also, the caps exclude spending in Iraq and Afghanistan.
Boehner's plan compares more favorably to CBO's January baseline. If measured against those numbers instead, it reduces deficits by $1.1 trillion over 10 years, and cuts discretionary spending by $13 billion in 2012.