I’m working on an op ed on the “fiscal cliff” and just for kicks, I decided to see just how savage these massive cuts in spending would be. Now let me confess, the results shocked even me, so by all means, somebody show me what I’m overlooking…
Here’s a snapshot from a table in the CBO’s August 2012 forecast:
We are already in Fiscal Year 2013; it started on October 1. So the column for 2012 is already done; the changes (if no deal is reached) will show up in the 2013 numbers.
So: If nothing is done and we go over the “cliff,” then total spending will drop from $3.563 trillion to $3.554 trillion, a reduction of $9 billion, or 0.3%. Notice everyone, I am saying a drop of three-tenths of one percent. Then, by 2014, total spending will have risen to above where it was this year, in 2012 (because 3,595 > 3,563).
On the revenue side, going over the “cliff” is projected to raise receipts from $2.435 trillion in 2012 to $2.913 trillion in 2013, an increase of $478 billion, or 19.6%.
The deficit in 2013 is projected to be $641 billion, down from the actual $1.128 trillion deficit in 2012, for a drop of $487 billion.
In summary, if we go over the “cliff,” the government plans on sharply reducing the budget deficit compared to its 2012 level. Of this $487 billion reduction in the federal budget deficit, the savings will come through two mechanisms:
==> A cut of $9 billion in government spending (1.8% of the deficit reduction), and
==> An increase of $478 billion in tax receipts (98.2% of the deficit reduction).