Washington DC's New Math

Last night (March 20th, 2012) David Axelrod stated that “the President has reduced discretionary domestic spending by $1.2 trillion.”

WOW! That’s amazing! Considering that total discretionary domestic spending for 2011 was $600 billion, that is really some feat!

Of course, like much of what comes out of Washington, this takes a little explaining. First, you have to understand that when the White House talks about budgets they are talking about ten years worth of budgets. So, the statement above should be that “the President has reduced discretionary domestic spending over the next ten years by $1.2 trillion.”

Unfortunately, that isn’t quite accurate either. Let me explain. In 2011 domestic discretionary spending was $600 billion. Now, for those not familiar with Washington math, I would suppose you would think that the President and his staff had done something like this: “If we continue to spend $600 billion each year for ten years, we will spend $6 trillion. But we need to cut the budget. Let’s get that total down to $4.8 trillion. That will save the American people $1.2 trillion.” Sounds good!

But, here’s what the President’s budget looks like for Domestic Discretionary Spending, by year, 2013 through 2022: (in billions of dollars):

565, 546, 543, 546, 553, 561, 573, 585, 597, 611 – for a total of $5,680

The President’s budget notes this total as $5,682 – they obviously have some decimal points that we can’t see. So, where did we get $1.2 trillion? The $1.2 trillion comes from subtracting 5,680 from 6,800. But where did the 6,800 come from? Well, that is the amount of money in Domestic Discretionary Spending IF the government had continued spending at a rate that increased spending at about 3% per year for each of the next ten years. For budgets that didn’t exist yet. This is analogous to the average household looking at expenses for the year, noting that you had spent $500 cutting the grass and shoveling the driveway and walk way last year ($20 to the neighbor’s kid each time), spent $515 this year for the same thing, deciding you will forego one mowing this year – saving $20) and then announcing you reduced household expenses $200.)

So, what Mr. Axelrod should have said is this: “[t]he President has reduced discretionary domestic spending over the next ten years - when compared to possible future budgets that assumed no change in spending behavior despite any economic slow-downs - by $1.2 trillion.”

That sounds pretty weak doesn’t it? Except we’re not done yet. What Mr. Axelrod failed to mention was that part of the reduction in spending included redefining domestic discretionary spending, and removed $627 billion from discretionary spending and redefined it as mandatory spending. So, if that number is added back into domestic discretionary spending, so we can see how much money the nation saved, we find that those categories that were labeled as ‘Domestic Discretionary Spending’ in 2011 will entail the total spending of $6.309 trillion over the next ten years, which is more than if we simply froze all spending at current levels. Some simple math shows that we are spending more than $300 billion 1% increase in spending per year. No savings, an increase.

So where are the savings? There aren’t any. Let me repeat that: there aren’t any. So, now we are left with what Mr. Axelrod might have meant to say: “[t]he President has redefined discretionary domestic spending so that we can categorically state that over the next ten years - when compared to possible future budgets that assumed no change in spending behavior despite any economic slow-downs – spending as we define it will be reduced by $1.2 trillion.”

And what happens to the debt as these linguistic and actuarial gymnastics take place? The total national debt will grow by another $7.3 trillion dollars. (Of course, that assumes those numbers are right, and we already know the estimates for 2012 are low by several hundred billion dollars).

So, if Mr. Axelrod had meant to be accurate, he would have said something like this:

“[t]he President has redefined discretionary domestic spending so that we can categorically state that over the next ten years - when compared to possible future budgets that assumed no change in spending behavior despite any economic slow-downs – spending as we define it will be reduced by $1.2 trillion, while the national debt will continue to climb.”

Glad we got that straight.