Committee for a Responsible Federal Budget

A Tale of Two Caps

Jul 26, 2011 | Other Spending

Update: CBO has scored Boehner's legislation, showing it to reduce deficits by a total of $850 billion from 2012-2021. The discretionary caps are $1.1 trillion below CBO's March baseline over ten years, but only $840 billion below a baseline that incorporates the final CR.

House Speaker John Boehner (R-OH) and Senate Majority Leader Harry Reid (D-NV) both released "dueling" debt plans yesterday, which actually have a lot of similarities (more on that later). We will compare the broader provisions of the two proposals later here on The Bottom Line, but first, we will look at the discretionary spending caps that each proposal calls for.

Just like other parts of their plan, these caps are very similar, reflecting a supposed agreement that was made in this area. Both plans have around $1.045 trillion in budget authority for 2012, about a $20 billion drop from this year's spending levels. After remaining roughly frozen for 2013, the caps grow with inflation thereafter. Overall, by their estimates, the caps would save $1.2 trillion over ten years. The numbers are not exactly the same, because it appears Boehner could be relying on the CPI while Reid uses the GDP deflator to adjust the caps after 2014 (the CPI is estimated to grow slightly faster during those years). 

The graph below compares Boehner and Reid's caps, along with the Fiscal Commission's discretionary caps and the CBO March baseline.

[chart:4712]

 

While the discretionary caps are overall quite similar in their amounts, there are a few technical differences between the two sets of caps. In Boehner's caps, separate limits for defense and nondefense spending apply for 2012 and 2013, although they are given as ranges--$535-$569 billion for defense in 2012, $537-$571 billion in 2013--not exact numbers. Reid's caps provide these limits, but for security and nonsecurity spending (defense plus veterans spending) and he gives exact numbers instead of ranges.

Still, the technical differences are vastly overshadowed by the great similarities. It seems that there is agreement on the level of discretionary spending cuts. That's a start to getting an overall deficit reduction agreement tied to a debt ceiling increase.