Harry Reid’s fuzzy math on defense savings

Senate Majority Leader Harry Reid‘s (D-NV) newest plan to cut the deficit includes $1 trillion in "savings" from winding down the wars in Iraq and Afghanistan, but the numbers just don’t add up.

Reid’s plan, unveiled in a press conference today, claims to save $2.7 trillion over 10 years, including $1.2 billion in cuts to discretionary spending, $400 million in "interest savings," and over $1 trillion from "winding down the wars in Iraq and Afghanistan."

The $1 trillion in defense "savings" that Reid is claiming his plan provides is based against a projection the Congressional Budget Office put out last March that said war costs would top $1.67 trillion over the next ten years. However, that projection was never meant to accurately forecast the costs of the wars over the next decade. The report just took this year’s costs for Iraq and Afghanistan ($159 billion) and added inflation for every year in the future.

The CBO made its projection based on simple math and it never had any connection to policy realities, as the Congressional Research Service explained in a new report today.

"The CBO baseline reflects CBO’s March 2011 estimate of FY2011 overseas funding with increases at the rate of inflation in subsequent years," said the new report, which was crafted for congressional offices but obtained by The Cable. "It is important to note that the administration projection is not really a policy-based estimate — CBO takes the most recent number and that becomes their baseline."

In other words, the CBO number, which puts the cost of the wars at $1.7 trillion over the next ten years, was the projection if the U.S. kept the current number of troops in Iraq and Afghanistan until 2020. However, nobody ever thought that was the plan. The CBO was required to do the math that way, as they do with all such projections.

The reality is that it is impossible to estimate the costs of the wars, because fundamental questions about U.S. policy toward both countries remain unanswered. For example, will the Afghanistan drawdown be complete by 2014, and what will be the pace of the drawdown? Will all U.S. troops be out of Iraq by the end of the year?

The CBO also put out numbers for war costs that assumed a gradual drawdown of troops. In fact, they put out two numbers, based on two different possible policy options. If U.S. policymakers decided to drawdown to 45,000 troops in both countries by 2015, the CBO projected that the cost of the wars would be $624 billion over 10 years. A steeper drawdown to 30,000 troops by 2013 would make the projection $422 billion over the next decade.

Reid appears to be counting the difference between the CBO’s $1.7 trillion projection and its estimates of the cost of the wars after a steep drawdown as "savings." But that’s problematic, because the base figure is simply a very high projection that has no connection to policy. Either way, the actual future drawdown plan is unknown.

A fact sheet issued by Reid’s office only said, "Winding down the wars in Iraq and Afghanistan will save $1 trillion. Paul Ryan’s budget also included this savings in its deficit reduction calculation, which was supported by 235 House Republicans and 40 Senate Republicans."

It’s ironic that Reid defends his $1 trillion figure by pointing to the Ryan budget, because that document took its projections of future war costs from the Obama administration’s February budget.  In that report, OMB budgeted an annual sum of $50 billion for the both wars. But that estimate was also made without knowing future U.S. policies toward Iraq and Afghanistan, and it’s doubtful that the wars will cost $50 billion each year until 2020.

Gordon Adams, who led OMB’s national security division during President Bill Clinton’s administration, wrote that the $50 billion estimate was "what budget folks (like me) call a ‘plug’ — we know something will go there, but we don’t know what it is."

By comparing fake numbers to each other, politicians can appear to be saving money, he claimed, without having to make actual defense cuts. Meanwhile, there’s no real impact on the deficit.

"It abuses the budget process because the savings are mythological, not real, so they enforce no discipline on the Defense Department," Adams wrote. "And they are a fraud on the public, who will think a budget deal has cut the defense budget, when it has done no such thing."

In an interview today, Adams told The Cable that the whole episode is just another example of our leaders focusing on optics rather than getting down to the hard work of actually fixing our fiscal situation.

"Because it’s too hard to really tackle the defense budget, first Ryan and now Reid have reached for these pseudo savings," he said. "The bottom line here is these are not budget savings. It doesn’t make any sense."