The Associated Press story that has Congress in a tizzy says that the CBO reads the new budget deal as massively less thrifty than advertised. However, there’s a crucial error in the reporting. See if you can spot it.

A new budget estimate released Wednesday shows that the spending bill negotiated between President Barack Obama and House Speaker John Boehner would produce less than 1 percent of the $38 billion in claimed savings by the end of this budget year.

The Congressional Budget Office estimate shows that compared with current spending rates the spending bill due for a House vote Thursday would pare just $352 million from the deficit through Sept. 30. About $8 billion in cuts to domestic programs and foreign aid are offset by nearly equal increases in defense spending [...]

The CBO study confirms that the measure trims $38 billion in new spending authority, but many of the cuts come in slow-spending accounts like water-and-sewer grants that don’t have an immediate deficit impact.

Did you find it? The bill to be voted on tomorrow does not reduce spending in FY 2011 by $38.5 billion. That’s because $12.5 billion of the spending cuts have already been passed and enacted by this Congress in three previous continuing resolutions. The comparison being made to arrive at these number looks back to December, so this may be an apples-to-apples comparison, but it’s still misleading work from AP. What’s more, with defense spending increasing, offset by domestic spending reductions, the impact remains major for those of us not working for defense contractors and requiring government services.

Here’s the CBO document that has been released, and you’ll see that they make a distinction between budgeting authority and actual outlays. Outlays come from appropriations from previous years that actually get spent in 2011. Budgeting authority is what will be authorized in this budget. It’s a worthwhile distinction to make, but it’s also not terribly meaningful. The stimulus package is still extant in FY 2011 and still supposed to be spending money; that would account for the major difference between budgeting authority and outlays in the Transportation and HUD section of the budget. There’s always a lag between budgetary authority and outlays; that doesn’t mean there’s no impact from cuts to budgetary authority.

What’s being missed here is the opportunity cost. If the budget were agreed to, say, last year, many of the unused spending accounts and rescissions would have been replaced with actual useful spending. That’s basically the function of the budget process. You would have to believe that Dave Obey and Dan Inouye’s omnibus deal would have put all that budgetary authority – including Census spending in 2011! – on auto-pilot. There’s a serious opportunity cost here at a time when the economy is weak, unemployment is high and the country has work to be done.

CBO claimed in a separate unreleased document that the cuts to Kent Conrad’s co-ops and bonuses to states for enrolling more children in health insurance programs won’t produce savings because the spending authority was unlikely to be used. It’s amusing that CBO thinks Kent Conrad’s co-ops are worthless, but since when do they issue this kind of analysis? It seems very tailored to the idea that there’s nothing to see here with this budget deal. I would grant that the decision to include mandatory cuts saves a lot of money from being cut in the short run and the long run.

Then there’s the fact that this budgetary authority creates a new baseline for future spending, that will get reduced over time. When President Obama issued a discretionary budget freeze, he claimed $400 billion in savings over 10 years, and the CBO backed him up on it. There’s nothing different going on with this budget deal. In addition, the elimination of year-round Pell grants scores as a $40 billion reduction over 10 years. There are long-term fiscal consequences to this deal, as CBO indicates.

This is at least the fourth AP story trying to explain away the deficit reduction in the 2011 budget deal. Considering how many transparency measures will have their funding cut, I appreciate AP’s effort, but I’m not sure they’re providing the whole story.

It’s somewhat valuable to the President to have this out there, to buck up his supporters who have been chastened by the budget deal. But the timing couldn’t be worse. The bill hasn’t passed yet. They passed the rule for the bill yesterday without one dissenting vote from the Republicans, and the final vote should happen today. In fact, it has to happen today – funding from the last stopgap runs out at midnight. And then out comes this AP story that the deal only cuts spending by $353 million, which could spook plenty of conservatives already on the fence about the measure. That’s why the GOP leadership is fighting back.

“This bill will cut $315 billion in Washington spending over ten years, $78 billion compared with the President’s request this year alone,” Michael Steel, spokesman for House Speaker John Boehner, R-OH, said. “Democratic spin and arcane budget jargon doesn’t change that.”

The GOP House leadership is really pissed at Tim Pawlenty for trying to derail the deal, and this report will only anger them further. Boehner’s whip operation is definitely nervous and trying to nail down the last few votes. (David Rogers, by the way, is far better than AP at telling the entire story of what CBO said.)

Some Democratic Congresswomen are fasting in protest of this bill. Democrats on the House Appropriations Committee think they can get 60-70 votes. Rob Andrews (D-NJ) told Politico “I don’t see any chance that this fails unless the bottom falls out with the House Republicans.” A story like this, flawed as it is, could cause that bottom to drop.

And then you have the Senate, where Lindsey Graham is going nuts over the removal of one $50,000 project to study the Port of Charleston from the deal. He vowed to “tie the Senate up in knots,” and that could start with a filibuster of the vote tomorrow. That would by itself cause at least a short-term government shutdown.

Nobody seems to be anxious about this. Maybe it’s nothing and the deal will pass. I think there’s enough doubt, however, to make the day interesting.