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Dankdude · #1 05-21-2008, 02:11 PM

: Part I

May 13, 2008
Updated: May 16, 2008
Fact Check dot org

Summary

McCain’s big promise is that he can balance the budget while extending Bush’s tax cuts and adding a few of his own. He likes to leave the impression that this can be done painlessly, for example, by eliminating "wasteful" spending in the form of “earmarks” that lawmakers like to tuck into spending bills to finance home-state projects. We found that not only is this theory full of holes, it's not even McCain's actual plan. In this story we examine the spending-cut side of McCain's budget program. In Part II, we'll look at what McCain has said about taxes.

McCain's pronouncements on cutting spending, and even on the growth in the size of the federal government, are dubious at best:

McCain seems to say that he can save $100 billion by cutting out earmarks. But budget experts say that cutting earmarks would actually save very little. And questioned more closely, McCain's campaign now says that his planned savings have nothing to do with eliminating earmarks.
With earmarks out as a potential source of savings, McCain hasn't said what he'd cut out of the discretionary budget to get to $100 billion. He's even indicated that defense spending might increase. If defense spending is off the table, saving $100 billion would require 18.5 percent across-the-board cuts in every other discretionary program, including things like elementary and secondary education, veterans' health benefits and highway construction. The alternative would be severe cuts in a few programs, as yet unnamed.
McCain says that "just in the last few years" the government has puffed up "by 40 percent, by trillions." Actually, it has taken federal spending a decade to grow 40 percent, and even longer to grow by "trillions." In inflation-adjusted dollars, federal spending is projected to come to $2.45 trillion in fiscal 2009, including $1.4 trillion for Social Security, Medicare, military spending and veterans programs. The last time the budget was "trillions" smaller was 1951.

Update, May 16: In our original article, we did not specify in the summary that the $2.45 trillion in federal spending is measured in inflation-adjusted dollars, with 2000 as a baseline. Also, we have changed the summary to reflect that the estimate is for fiscal year 2009, as we say in the Analysis section; the spending levels are still being developed by Congress.

Also, we should not have said that student loans were part of the discretionary budget, as we did originally. They are not. And we have changed the term "assistance to veterans" to be more specific, since some veterans programs are mandatory and some are discretionary.

Analysis

Beginning, appropriately enough, with an April 15 speech, presumptive Republican presidential nominee John McCain began unveiling a series of economic proposals. He elaborated on his plan in an April 16 interview with Andrea Mitchell on MSNBC and again in an April 20 appearance on "This Week with George Stephanopoulos" and has continued repeating many of his claims on the stump. In the first of our two-part article on McCain's budget and tax proposals, we look at his plan to reduce government spending.

McCain's Earmark Sleight-of-Hand

McCain (April 15): I will veto every bill with earmarks, until the Congress stops sending bills with earmarks. ... The great goal is to get the American economy running at full strength again. ... And one very direct way to achieve that is by taking the savings from earmark, program review, and other budget reforms.

McCain (April 16): I can show you $35 billion just in the last two years of pork-barrel projects that should be eliminated that would certainly help pay for a lot of that [proposed tax cuts]. And $65 billion that's already on the books.

McCain (April 20): Two years in a row, last two years, the president of the United States has signed in a law, two big-spending, pork-barrel-laden bills worth $35 billion. That increases the budget, the baseline of the budget. In the years before that, $65 billion. You do away with those, there’s $100 billion right there, before you look at any agency of government.

McCain is apparently claiming that he can save $100 billion simply by eliminating earmarks, past and present. Let's start with a simple overview of earmarks, which are line items inserted by lawmakers into legislation funding the federal government. Estimates of earmarked spending vary. For fiscal 2008, the budget watchdog group Taxpayers for Common Sense said there was $18.3 Billion earmarked in spending bills. Citizens Against Government Waste came in at $17.2 Billion. The Office of Management and Budget tallied earmarks at a mere $16.9 Billion. In 2006, the Congressional Research Service, which used a different definition of "earmark" for each of the 11 spending bills it studied in that year, came up with over $67 Billion.

But contrary to popular belief -- this is the first of several bits of information readers may be surprised by -- cutting earmarks wouldn't necessarily cut government spending, according to independent budget experts from across the political spectrum. Jeff Patch, a budget fellow at the libertarian Cato Institute (and also a former McCain volunteer) told FactCheck.org that "earmarks just direct funds from executive agencies to specific projects or companies." That is, while there are still a few pet projects slipped into legislation in the dark of night that do increase the federal budget, earmarks often simply tell agencies how to spend money that they are already getting. So while earmarks may drive up the cost of government slightly (by, for example, awarding no-bid contracts in a legislator's home district), cutting earmarks alone is "not sufficient for cutting wasteful spending," Patch said. The Brookings Institution's Paul Cullinan, research director of the Budgeting for National Priorities Project, agrees, saying that earmarks "might be an allocation issue" rather than a spending issue. And Scott Lilly, a senior fellow with the liberal Center for American Progress, told us that "there’s no evidence that if you took earmarks out, federal spending would go down."

And (surprise #2) McCain now says that many earmarks aren't really wasteful spending at all. For example, in 2006 the Congressional Research Service counted 75 percent (or $15.7 billion) of the 2006 foreign operations budget as earmarks. That figure includes $4.3 billion in aid to Israel and Egypt. Another $16.1 billion was earmarked for military construction and veterans affairs, and $9.4 billion more was earmarked for defense spending. That's $41 billion – or more than two-fifths of the amount of earmark spending McCain cites. But McCain has no plans to cut those particular earmarks. Douglas Holtz-Eakin, McCain's chief economic adviser, told FactCheck.org that "if you don't have earmarks, a lot of those things would be funded under regular order, if they have merit."

So if all this savings isn't coming from earmark cuts, then where will it come from? Holtz-Eakin tells us (surprise #3) that it will come from cuts in the annual budget:

Holtz-Eakin: So what he’s talked about is going forward, just not signing bills that have earmarks in them, period. That’s his pledge. And then, also going forward, cut discretionary spending, and that’s simply a pledge to reduce the amount of spending. And it’s not that it’s going to be tied to going back to specific projects that began as earmarks. It’s that we’re going to scrub defense, non-defense spending alike, reform procurement, evaluate programs, take the time-out, the one-year pause, and look at everything and then cut the budget going forward. Which, ultimately, hopefully, we’ll get $100 billion out of the annual baseline.

When we asked specifically whether the $100 billion in spending cuts had anything to do with eliminating earmarks, Holtz-Eakin told us: "It can't. I mean, by definition, every dollar is up for grabs every year."

So McCain's boast that he can save $100 billion "before you look at any agency of government" is flatly false. His economic adviser tells us that budget cuts cannot, "by definition," arise simply by eliminating earmarks. Instead, McCain's plan is to scrub $100 billion from the discretionary budget. And those cuts are not at all linked up to past earmark spending.

McCain's attempt to conflate earmark reform with budget cuts is a bit of logical sleight-of-hand (a formal logical fallacy that philosophers call an undistributed middle). McCain's argument is that:

The McCain economic plan will cut $100 billion of the discretionary budget
Past and present earmarks account for $100 billion of the discretionary budget.
Therefore, the McCain economic plan will cut past and present earmarks.

The argument is seductive. But consider another argument that has exactly the same logical structure:

Clouds are white and fluffy.
Sheep are white and fluffy.
Therefore, clouds are sheep.

Sheep and clouds have some properties in common, but that doesn't mean that they are the same thing. Similarly, earmark cuts and budget cuts may add up to the same totals, but that doesn't mean that the budget cuts will be the result of earmark cuts.