CBO Says Actual Spending Cuts Small

CBO Says Actual Spending Cuts Small

Some cuts won't affect 2011 fiscal year because of Federal accounting methods.

The Congressional Budget Office reports the federal budget compromise that was hailed as historic for proposing to cut about $38 billion will reduce federal spending by only $352 million this fiscal year. That's less than 1% of the bill's advertised amount. President Obama signed the bill Friday officially ending the prospect of a government shutdown. The analysts also found that $13 billion to $18 billion of the cuts involve money that existed only on paper and was unlikely to be tapped in the next decade.

Understanding how federal budgets work will help explain the situation.  Congress usually gives agencies the authority to draw from Uncle Sam's one gigantic checking account, the Treasury's General Fund.  The agencies can't take money out of this fund until they're ready to spend it. And, sometimes agencies aren't ready to spend the money until a year, or longer, after Congress gives the OK.

The compromise bill has canceled some of these long-term purchases.  These are real cuts, experts say: They stop spending that was going to happen. But they aren't counted in the current fiscal year, because the money was going to be spent later. That's part of the reason why just $352 million in the cuts will be felt during fiscal 2011.

The final roll call in the House dramatized the divisions within both parties: 179 Republicans were joined by 81 Democrats in support of the bill. Voting against the bill were 59 Republicans and 108 Democrats.

The bill won support from most of the 87-member freshman class, even though they were elected with a strong mandate to cut spending and have a reputation for defying party leaders. Sixty supported the bill.

The conservative lawmakers willing to defy House Speaker John Boehner R-Ohio, on this vote are likely to remain a focus of attention as Congress takes up other major fiscal issues soon, such as a measure to raise the nation's debt ceiling.

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