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Thank You, CBO

The CBO's report on the actual $352 million saved in this year's budget is a blessing for conservatives.

By 4.15.11

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Yesterday, despite the defection of 59 Republican votes, the House of Representatives passed the budget for the rest of the 2011 fiscal year as negotiated between John Boehner and Harry Reid. The Senate passed the bill 81-19 shortly thereafter. This after a Congressional Budget Office report suggested that only $352 million will be saved this year, versus the claimed $38.5 billion of savings in the budget. That CBO report is a blessing for fiscal conservatives.

My original reaction to the deal was that Tea Partiers should be pleased about the outcome; some fiscal hawks seem to have forgotten who controls the Senate and the White House.

The difference between the CBO's report and John Boehner's explanation is essentially due to arcane accounting methods and the difference between known spending and spending authority. Boehner's point is that this government will spend everything it's authorized to spend (and more) and that removing that authority is functionally equivalent to cutting immediate spending.

Boehner is right, but the game has been changed. The optics of the agreement after the CBO report are far different than before it. Losing 59 Republicans, of whom only 27 were freshmen, is a strong statement that these members of Congress think they may have been sold a bill of goods.

And for that reason, the CBO report is good news.

During the upcoming fight about the FY2012 budget, Tea Party-backed Republican members of the House will be more aggressive about cuts and more diligent about ensuring "real cuts" than they otherwise would have been.

President Obama will know that the House's starting position will be much more aggressive, much more budget-cutting, and with absolutely zero room for even a discussion of tax increases. Or will he?

After all, you might point out, the House passed the bill by a vote of 260-167, leaving one to wonder whether "moderate" (a term I do not use as a compliment in this case) Republicans and Democrats will get together to pass a less fiscally responsible budget over the objections of the fiscal hawks.

Here's why I think it won't happen that way:

House Democrats went along with this bill because Obama had blessed it, because Harry Reid had negotiated it, and because Steny Hoyer told them to. (Hoyer put even more distance between himself and Nancy Pelosi, who voted against the measure). This bipartisan budget kumbaya won't be the case with the FY2012 budget. Instead, even the most "moderate" (which is to say the least disciplined and the worst for our children's futures) Republican budget will have entitlement and pro-growth tax reforms which few Democrats will support. Therefore, John Boehner will not be able to count on Democrat votes the way he could on Thursday.

And on the Republican side, each "moderate" Republican, especially those who are in fairly or very safe Republican districts, knows that a vote for a lily-livered budget is a vote for a primary challenge. They all saw what happened to former Senator Bob Bennett (RINO-UT), former Congressman Bob Inglis (R-SC), former Governor Charlie Crist (RINO-FL), just to name a few ousted "moderates". (To be fair, Inglis' record was reasonably conservative but he made a few bad votes which cost him his seat in Congress.)

The left's talking points of Republican "draconian cuts," killing grandma, destroying Medicare, and so on, may or may not be effective in a general election -- though I doubt their effectiveness in 2012 -- but they fall on deaf ears, or on no ears at all, when it comes to Republican primaries.

To put it another way, you'd expect conservative freshmen Senators Mike Lee (UT) and Rand Paul (KY) to push for aggressive Social Security reform. And you'd expect conservative Jim DeMint to support a Balanced Budget Amendment to the Constitution (along with Lee and Paul, though not all Republican Senators agree on their preferred specifics). But when you see Lindsey Graham (R-SC), long a champion of "comprehensive immigration reform" (aka amnesty) and a believer in the hoax of man-made global warming, co-sponsor these things, you know he's seeing the shadow of a primary challenger as he approaches his re-election campaign in 2012.

As if on cue, Senator Graham voted against the compromise budget on Thursday, proving that fear is a powerful motivator for a guy who's often seemed too eager to go along to get along.

It is this fear that will keep "moderates" and RINOs from supporting the weak tea of budget reform that we've come to expect from them. If anything, they'll have to play extra-hard ball to try to dissuade a Tea Party-backed primary challenge. Indeed, Graham need look no further than his own backyard for a reminder of his risk: Congresswoman Nikki Haley was a little-known member of the South Carolina House of Representatives who, with the endorsement of Sarah Palin, came from behind to win the Republican gubernatorial primary over several better-funded "establishment" candidates, including the state's Attorney General, Lieutenant Governor, and a sitting Congressman.

I can't tell you that I fully understand what's cut and what isn't cut in the negotiated budget for the last 6 months of FY2011. I can tell you that it barely matters. The big fight is coming up and has implications not only for the economic future of the United States but, more importantly to incumbent politicians, for the 2012 elections.

The fact that many Republicans are now unsure whether the cuts they thought were achieved in the 2011 agreement were substantial -- or even real -- makes the prospects for both an aggressive 2012 budget and substantial Tea Party election gains next November that much more likely. Thank you, CBO.

(All of that said, and lest I sound more optimistic than I am, John Boehner was right when he pointed out yesterday that the 2011 budget deal was the best that could be reached under divided government. That dynamic won't change, and we're unlikely to get a 2012 budget that is fiscally responsible enough to make most Republicans happy. But this fact, too, bodes well for conservative gains in next year's elections. For those elections, I'm more optimistic than for any budget process occurring while the most leftist president in our nation's history occupies the White House.) 

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About the Author
Ross Kaminsky is a self-employed trader and investor and is a senior fellow of the Heartland Institute. He is the host of The Ross Kaminsky Show on Denver's NewsRadio 850 KOA on Saturday mornings from 6 AM to 9 AM. You can reach Ross by e-mail at rossputin(at)rossputin(dot)com.