Real Cuts and Phantom Cuts in the $38 Billion Budget Deal

The budget deal is up to three-quarters "phantom" cuts from left-over funds and programs that wouldn't have spent the money anyway, according to numerous reports on the compromise that averted a government shutdown late last week.

Here is our guide -- drawing on reporting from the AP, CBS, National Journal and Washington Post -- to the $27 billion in "phantom" cuts and to where the real cuts will be felt. There is a wide range of opinion over what constitutes a "phantom" cut; for example, cutting a fund that hasn't been tapped might still cut dollars that would have been shifted to other programs. But suffice it to say that the following cuts have been called into question by mainstream organizations today.

The Phantom Cuts

$10 billion from earmarks that Republicans already tried to ban this year [AP]

+ $4.9 billion from the Justice Department's Crime Victims Fund ... "a reserve fund that wasn't going to be spent this year [so that] crime victims would receive no less money than they did before the deal." [WP]

+ $3.5 billion from an "unused spending authority" to help children of low-income familiess [AP]

+  $2.5 billion from highway funds that couldn't be spent anyway [National Journal]

+ $2.2 billion in health insurance co-ops subsidies that will be funded via healthcare reform anyway [AP]

+ $1.7 billion left over from the 2010 Census [AP]

+ $800 million from Pell Grant funds through a mechanism the president already endorsed in his budget [NJ]

+ $650 million comes by not repeating a one-time infusion into highway programs [AP]

+ $350 million by cutting a one-year program enacted in 2009 for dairy farmers then suffering from low milk prices [AP]

= $27 billion in "phantom" cuts. This is a debatable figure. Tim Fernholz, for example, lists "real" cuts at $15 trillion, which would suggest $23 billion in phantom cuts.

The 'Real' Cuts

They include:

-- $2.9 billion in high-speed rail funds [NJ]
--$1.6 billion in reductions at the Environmental Protection Agency  [NJ]
--$1 billion from drinking water funds at the Department of the Interior [NJ]
--$1 billion from 55 programs in the areas of health, labor and education [WaPo]
--$1 billion across-the-board cut shared among all non-defense agencies [WaPo]
--$800 million from first responder grants
--$600 million from community health centers
--$500 million from aid to multinational institutions and international banks [WaPo]
--$500 million from nutrition programs
--$400 million from state and local law enforcement assistance
--$300 million from Fish and Wildlife Services and National Park Service

The Spared

1. Maximum Pell grants will stay at $5,500
2. "Race to the Top" aid for public schools will get a $700 million boost
3. There will be no cuts to the $150 million Washington Metro program

4. Obama stiff-armed attempts to cut grants to community health centers, the National Institute of Health, and public broadcasting


Read the full stories at AP, CBS, National Journal, and the Washington Post

Presented by

Derek Thompson is a senior editor at The Atlantic, where he writes about economics, labor markets, and the entertainment business.

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