Sarah Palin says $38 billion in cuts in budget compromise is really “less than $1 billion in real cuts”

About 11 p.m. on April 8, 2011, shortly after a federal budget compromise averted a government shutdown, President Barack Obama addressed the nation from the august Blue Room of the White House.

The compromise measure, he declared, contained "the largest annual spending cut in our history."

News reports pegged the figure at $38 billion.

Eight days later, with sleet bearing down on her outside the Wisconsin Capitol, Sarah Palin took aim at the budget compromise while speaking to a tea party rally.

The former Alaska governor and 2008 Republican vice-presidential nominee asserted that because of "politics-as-usual and accounting gimmicks, we find out it’s not $38 billion in cuts."

She added: "We find out it’s not even $38 billion; it’s less than $1 billion in real cuts."

Palin’s claim about the bill, which was signed into law by Obama, was about as specific as it was startling.

Let’s find out if it’s true.

News media throughout the country reported that the compromise made $38 billion in spending cuts -- but they characterized the cuts in different ways.

The New York Times said the cuts would be made "this year." Reuters was more specific, saying they would be made by Sept. 30, 2011, the end of the federal government’s 2011 fiscal year. But the Associated Press said "most of those cuts will either not take effect until future years or amount to accounting gimmicks that won’t reduce actual spending."

The reports were consistent, however, on the amount of the cuts: $38 billion.

So, how could $38 billion become "less than $1 billion in real cuts," as Palin claimed?

We e-mailed SarahPAC.com -- the website for Palin’s political action committee, which has fueled speculation that she might run for president in 2012 -- but didn’t get a reply. We did get a return e-mail from Conservatives4Palin.com, which supports Palin but is not an official Palin website.

That e-mail cited an Associated Press article that was published three days before Palin’s speech in Madison. It quoted the Congressional Budget Office, Congress’ nonpartisan fiscal analyst, as saying the compromise would cut just $352 million in spending by Sept. 30, 2011.

So, the CBO seemed to provide some backing for Palin.

The CBO analysis, however, was limited to cuts that would be made in the current fiscal year.

The same Associated Press article cited by Conservatives4Palin.com explained how a bill that was touted to contain $38 billion in spending cuts was producing only $352 million in cuts in the first 5-1/2 months after being signed into law.

"At issue is a concept in budgeting that is often difficult to grasp," the article said. "Appropriations bills like the pending measure give agencies the authority to spend taxpayers’ money. But such authority typically takes months or years to actually leave the federal Treasury, so cuts made in the middle of the budget year often have little immediate impact."

In other words, the budget compromise cancelled what is known as the budget authority for $38 billion worth of spending. But only $352 million in actual spending would be eliminated before Sept. 30, 2011.

An explanation provided by a Washington Post article, published two days before Palin’s Wisconsin speech, was more thorough.

That article said "Congress usually gives agencies the authority to draw from Uncle Sam’s one gigantic checking account. That is the Treasury’s General Fund, which is constantly taking in taxes, fees and borrowed money. The agencies can’t take money out of this fund until they’re ready to spend it. And that’s where it becomes complicated.

"Sometimes, agencies aren’t ready to spend the money until a year, or longer, after Congress gives them their IOU. That’s not a problem when an agency makes a one-time purchase for something like pencils. Officials call a supplier, get their pencils and write a check, and the money is gone. But it works differently when the government buys an aircraft carrier," when the final check won’t be cut until several years later, the article said.

The Post also found 98 instances in which the budget compromise took back unused IOUs and called it a cut. For example, the article said, the compromise "takes $560 million from the Academic Competitiveness and SMART programs, which gave grants to college undergraduates. But the programs are set to end after this school year. And the Education Department has enough cash to cover the remaining grants."

In other words, some of what is counted in the bill as spending cuts are monies that had budget authority but would never have actually been spent. That also lends support to Palin’s claim, that not all of the $38 billion in the announced spending cuts would actually be achieved.

Well, how much spending will actually be cut?

Two days before Palin’s Madison speech, the Congressional Budget Office issued a second report on the budget compromise. It estimated that, beyond the $352 million in spending cuts that would be made by Sept. 30, 2011, $20 billion to $25 billion in cuts would be made between 2011 and 2021, with the vast majority occurring between 2012 and 2016.

Clearly, $20 billion to $25 billion is less than the $38 billion in spending cuts that were claimed by backers of the compromise bill. But it also far exceeds the less than $1 billion in cuts that Palin claimed.

We consulted two Washington, D.C. think tank experts, Joseph Antos of the conservative-leaning American Enterprise Institute and Scott Lilly of the liberal Center for American Progress, who was chief of staff to former Democratic Wisconsin congressman Dave Obey.

They agreed that the CBO’s $20 billion to $25 billion estimate was the best representation of the spending cuts produced by the budget compromise.

Let’s review.

Sarah Palin claimed that a federal budget compromise, which was billed as containing $38 billion in spending cuts, would actually make less than $1 billion in cuts.

The nonpartisan Congressional Budget Office said the spending cuts would amount to only $352 million for fiscal 2011. But it said the cuts would total $20 billion to $25 billion from 2011 to 2021.

Palin’s statement contained some element of truth, in that the spending cuts amount to less than $1 billion for the fiscal year that ends Sept. 30, 2011. But she ignored a critical fact, namely that the bill makes $20 billion to $25 billion in cuts over the next 10 years. We rate her claim Barely True.

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