Much ado about not much: rhetoric dwarfs budget cuts in magnitude

In the midterm elections of 2010, Republican candidates showed substantial gains in congress; six seats in the Senate and sixty-four in the House. Their elective success was due largely to the unpopularity of the Obama-endorsed stimulus package and bailouts of the financial and automotive industries, totalling north of $1.5 trillion, in addition to widespread discontent over unemployment levels. The influx of new Representatives, many having little or no Congressional experience, adopted fiscal austerity as their priority-issue. As the new Congress commenced in January, a hostile battle of political rhetoric unfolded as both sides obstinately resisted compromise over the yet-unapproved fedral budget. After capturing media attention and dominating political discourse for months, the issue was finally settled on Thursday, as Congress and President Obama approved over $38 billion in spending cuts, applied retroactively to 2010 spending levels that were still in place until now, in addition to the 2011 budget going forward for the remainder of the fiscal year.

The truth is that the fiscal significance of these cuts has been massively overblown. The federal budget for fiscal year 2010 totaled $3.55 trillion; the deficit alone was $1.17 trillion. While $38 billion seems like a big number, it accounts for only about 1.1% and 3.2% of the budget and deficit respectively. Republicans got a tangible result they can boast of to their supporters, but the process produced heavy doses of partisan enmity and has hardly any offsetting effect on the monolithic deficit incurred since the '90s.

Many politicians, notably Obama and House Appropriations Committee Chairman Harold Rogers (R-KY), are heralding the spending cuts as the biggest in U.S. history, and that sentiment is being echoed pervasively by pundits and news sources. These self-adulating claims are incredibly misleading, if not outright false. In 1946, after the spending regimen of World War II, federal spending plummeted from $92.7 billion to $55.2 billion, an overall decrease of 40%. The $37.5 billion difference is equivalent to $425 billion today after adjusting for inflation.

Not surprisingly, the Department of Defense's budget increased by $5 billion to a FY 2011 total of $513 billion, with an additional $158 billion appropriated to fund the wars in Afghanistan and Iraq, as well as the Global War on Terror. These funds comprise about 18.5% of the overall budget and do not include debts accumulated from previous years of waging war. $7.5 billion of the cuts approved on Thursday are to DOD military construction funding. Other notable cuts include:

-$1.8 billion to Department of Interior Clean and Drinking Water funds
-$2.15 billion to Department of Health and Human Services programs for HIV/AIDS, hepatitis, STD, and tuberculosis prevention
-$6.9 billion to Department of Transportation Highway Funds
-$4.3 billion to DOT High Speed Rail funds
-$3.36 billion to the Department of Housing and Urban Development

More details provided by Rep. Rogers on the spending cuts can be found here.

After all the partisan hullabaloo and the much-hyped threat of a government shutdown, the fiscal impact of the budget cuts isn't nearly proportional to their impact on political perception.