CBO: Reid plan produces huge savings

The Congressional Budget Office disappointed House Republican leaders at a key moment yesterday, releasing an analysis that found Speaker John Boehner’s (R) budget proposal saves less than advertised. It sent Republican leaders scrambling, and delayed a vote in the House by at least a day.

The non-partisan CBO has also taken a look at the deal offered by Senate Majority Leader Harry Reid (D), and come to a more favorable conclusion (favorable, that is, if one’s goal is significant debt reduction).

In the battle of budget scores, the Senate Democrats deficit reduction bill is the clear winner thus far over an alternative by Speaker John Boehner, which had to be pulled back from a floor Tuesday night for retooling.

The Congressional Budget Office released a report Wednesday morning that credits the Senate bill with reducing budget deficits by about $2.2 trillion through 2012, nearly three times the $850 billion credited to the Boehner bill on Tuesday.

Part of the disparity is owed to the fact that the House bill takes a two-step approach to raising the debt ceiling and therefore postpones actions on major entitlement savings until November and December. A second factor is the Senate’s willingness to take advantage of CBO baseline rules and claim large savings from winding down US military operations in Afghanistan and Iraq.

Reid had said his plan would produce $2.7 trillion in savings over the next decade, $500 billion more than the CBO’s findings. That said, the report is otherwise good news for Reid, especially as far as the politics are concerned.

After all, there are, in effect, two main proposals under consideration with less than a week remaining. There’s Reid’s plan, which enjoys quite a bit of Democratic backing, which offers $2.2 trillion in debt reduction and takes default off the table through the end of next year. Then there’s Boehner’s plan, which is struggling to get a House majority, which offers $850 billion in debt reduction and forces policymakers to have another debt-ceiling fight in six months.

Worse, multiple reports suggest Boehner’s plan would increase the likelihood of a credit-rating downgrade, while Reid’s would not.

Reason hasn’t played much of a role in the debate thus far, but this morning’s CBO score will make it that much more difficult for Republicans to argue an economic catastrophe is preferable to Reid’s revenue-free compromise.