But have Washington politicians really reduced the deficit by $2.5 trillion? "They have not," answered budget guru Patrick Knudsen of the conservative Heritage Foundation. "They have put in place some proposals that would reduce spending if they hold up, but most of that has not happened."
The 2011 Budget Control Act, Knudsen said, "reduced spending from what it would have been without (spending) caps, because it's measured against a base line against inflation. The result this year is effectively a freeze on discretionary spending."
Spending in 2013 will be about the same as it was in 2012, but tax revenue will be higher. The fiscal cliff deal negotiated with Congress ended President Obama's two-year, 2 percent payroll tax holiday; that means about $93 billion in new revenue this year. The Obama tax hikes on the rich are expected to deliver another $27 billion. Almost all of this year's deficit reduction will come from tax hikes, not spending cuts.
It's funny -- well, not really -- how tax increases materialize during the year in which they are passed whereas spending cuts take forever. The Budget Control Act mandates more than $2 trillion in cuts over the next decade -- more than $900 billion in caps on the growth in spending and $1.2 trillion in the infamous sequester cuts, which would lower the caps further.
Caveat taxpayer: In the future, Congress will have to vote to stick with the 2011 caps in order for the cuts to hold.
"Almost immediately after a Congress enacts a spending reduction measure of any kind, there's a lawmaker behind it with a bill ready to repeal," noted National Taxpayers Union spokesman Pete Sepp. In this case, after the president signed off on the Budget Control Act, he tried to sabotage the sequester cuts. He didn't even put them in his 2013 budget. And it looked as if Republicans were going to accommodate him -- until they didn't.
The 2011 law mandated $110 billion in sequester cuts starting Jan. 1. But in the fiscal cliff deal, Congress agreed to put off the cuts until March 1 and reduce the total to $85 billion. The Congressional Budget Office, however, expects the actual outlay -- what Washington actually spends this year -- to be more like $44 billion.
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