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Spending Cuts in Deficit-Reduction Deals Prove Far Stickier Than Some Claim

June 28, 2012 at 9:23 AM

Some opponents of including revenue increases in a deficit-reduction deal — no matter how outweighed by spending cuts — argue that such cuts never “stick.”  We heard that argument again recently, when Grover Norquist’s Americans for Tax Reform asserted that “when bipartisan deals are struck promising to cut spending and raise taxes, the spending cuts don’t materialize but the tax hikes do.”

That assertion simply isn’t true.  The spending cuts included in the 1982 and 1990 budget agreements — which opponents frequently cite as proof of their claims — largely held up, as our new analysis explains.

The Congressional Budget Office (CBO) confirmed that the legislation implementing the 1990 agreement cut mandatory spending and increased revenues by $238 billion over the 1991-1995 period — 97 percent of the $246 billion savings target established in the Congressional budget resolution.  In a later retrospective analysis of both the 1990 legislation (which spanned the 1991-1995 period) and its successor, the 1993 Omnibus Budget Reconciliation Act (which covered 1994-1998 and actually tightened the 1990 deal), CBO found that lawmakers complied with the dollar caps for discretionary spending.  CBO also found that “between 1991 and 1997, most new revenue and mandatory spending laws that were enacted were consistent with the [pay-as-you-go] requirement to be deficit neutral.”

When it comes to the 1982 deficit-reduction agreement between President Reagan and congressional leaders, leading policymakers of both parties have flatly contradicted charges that the spending cuts promised in the deal never materialized.

The two notable occasions when policymakers haven’t adhered to spending cuts — the 1997 Balanced Budget Act’s caps on discretionary funding and its reductions in Medicare payments to physicians — are the exceptions, not the rule.  Unusual circumstances existed in both cases, and they provide little support for the argument that Congress habitually fails to produce promised spending reductions.

The fact is, our next deficit-reduction package needs to include both spending restraint and revenue increases.  Policymakers shouldn’t fall back on the false claim that spending cuts don’t stick as a reason not to support revenue increases as part of such a deal.


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