President Obama's proposed 'spending freeze' will only reduce the $42 trillion in government spending proposed between 2011 and 2020 by little more than one-half of 1 percent.
In his State of the Union address on Jan. 27, 2010, President Barack Obama unveiled a proposal to freeze discretionary spending for three years to help dig the country out of a "massive fiscal hole." But Obama included some caveats. He said the freeze would exclude spending on national security as well as entitlement programs such as Medicare, Medicaid and Social Security. And the freeze won't take effect until next year, "when the economy is stronger," he said. "Understand," Obama said, "if we don't take meaningful steps to rein in our debt, it could damage our markets, increase the cost of borrowing, and jeopardize our recovery -– all of which would have an even worse effect on our job growth and family incomes." That kind of belt-tightening talk makes for good sound bites, Republican leaders said afterward, but the freeze described by Obama, while a small step in the right direction, amounts to a tiny sliver of the country's massive (and growing) debt. "President Obama's proposed 'spending freeze' will only reduce the $42 trillion in government spending proposed between 2011 and 2020 by little more than one-half of 1 percent," House Republican Leader John Boehner wrote in a live blog during Obama's speech. But first, are Boehner's numbers themselves accurate? A report released this week from the nonpartisan Congressional Budget Office projected the federal government will spend $42.9 trillion over the next 10 years. The Obama administration itself says the freeze on nondefense discretionary spending would save $250 billion over 10 years. That number, however, is a bit more speculative than the CBO's overall estimate. Speaking before the Senate Budget Committee on Jan. 28, 2010, Douglas W. Elmendorf, director of the Congressional Budget Office, said his office did not have enough details from the White House about which categories of spending would be exempt from Obama's pledge. Those details will be revealed when the White House presents its proposed 2011 budget next week. But Elmendorf said perhaps the most crucial factor in determining the long-term effect of the freeze is what happens in the years after the freeze. If spending immediately goes back to the levels they would have been at had they been rising all along, "then the savings are just in those three years, and they're small," Elmendorf said. For example, Elmendorf said, a freeze on all discretionary appropriations would only save about $10 billion in fiscal year 2011. But, he said, if you essentially reset spending levels and only increase at the rate of inflation after the freeze, "then you can achieve significant savings over the remaining years." That's the route White House officials have said they want to go. So that $250 billion figure cited by the White House seems in line with other estimates. And by that measure, Boehner's attempt to put Obama's proposal into context is accurate. A freeze that would cut spending by $250 billion over 10 years amounts to a little more than one half of 1 percent of all government spending over that same period. But he also relied on math that made Obama's freeze look especially tiny because the other number he cited -- $42 trillion in overall spending -- includes mandatory entitlement programs such as Social Security, Medicare and Medicaid as well as discretionary nondefense and defense programs. If you remove those items, Obama's freeze accounts for a slightly larger share -- about 4 percent over 10 years. The White House, however, puts a more optimistic spin on this statistic saying that by the middle of the decade, nonsecurity discretionary spending would reach its lowest percentage of gross domestic product in 50 years. Still the big-picture point made by Boehner and other Republicans is that Obama's proposed three-year spending freeze, which would apply only to about 17 percent of overall spending, does little to address the "massive fiscal hole" he described. "In sum, the outlook for the federal budget is bleak," Elmendorf said. So how much of a dent would Obama's freeze make? "As a share of the total deficit problem, it is a small step," Elmendorf said. So Obama positioned the spending freeze as a way to rein in the country's mounting debt, and we think it's fair for Boehner to put those spending cuts in the context of overall spending. We rate Boehner's statement True.
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