The CBO report on John Boehner’s debt limit plan has really set back the effort and probably poisoned the entire enterprise among the more conservative members of his caucus. But it did provide some key information.

First of all, take a look at CBO’s summary of the Boehner plan. It would:

Establish caps on discretionary spending through 2021,
Allow for certain amounts of additional spending for “program integrity” initiatives aimed at reducing the amount of improper benefit payments,
Make changes to the Pell Grant and student loan programs,
Establish procedures for Congressional consideration of a balanced budget amendment to the Constitution,
Establish procedures to increase the debt limit by up to $2.5 trillion,
Reinstate and modify certain budget process rules, and
Create a joint Congressional committee to propose further deficit reduction.

There are no specific spending cuts in the entire plan. The cap on discretionary spending does all the work on the deficit reduction side until the joint Congressional committee, or Catfood Commission II, kicks in. In fact, there are two pieces of additional spending in the plan. The “program integrity Initiatives” would spend money to reduce waste, fraud and abuse in disability, SSI, Medicare, Medicaid and the Children’s Health Insurance Program. That’s right, John Boehner believes that it’s worth spending money – about $1 billion – to stop fraud and eventually save money in key programs. I guess that means he’s ready to bolster the IRS!

Then there’s the additional spending on Pell grants, to the tune of $17 billion over the next three years. Eventually, this gets offset by changes to the student loan program, eliminated subsidized loans for graduate students and eliminating loan repayment incentives. I believe those were both features of the President’s budget. Still, you have increased direct spending on Pell grants in this deficit reduction package.

Because the spending cap starts relatively high, the plan only reduces spending by $1 billion in Fiscal Year 2012. I know a lot of liberals are snickering at this one, but this is exactly what we should want to happen, and it provides some hope that all of these bills will be relatively benign in the near term, and just non-expansionary rather than contractionary. This will not come as a pleasant surprise to the right-wingers in the caucus, however.

Then there’s the fun with baselines. Boehner’s bill almost reaches its target, with $1.1 trillion in spending reductions from the January 2011 baseline. However, in between January and now, we had the 2011 appropriations deal, which cut spending by at least $250 billion in the ten-year budget window. So from that baseline, the cut is only $850 billion. Who leaped to Boehner’s aid on this one? None other than Jack Lew, the Director of OMB. Clearly everyone in the process wanted to use the earlier baseline to show a bigger deficit reduction number without actually doing the cutting.

While we disagree with the approach that Speaker Boehner chose to take in this bill, there is one thing that we all still agree on, and that is the size of the problem. Both the House Republican budget proposal unveiled by Congressman Ryan on April 5 and the President’s fiscal framework that he introduced on April 13, set as our goal deficit reduction of $4 trillion. Since both of these plans were introduced before the agreement on appropriations for FY 2011, the baseline used for them did not reflect the spending cuts enacted this year in that legislation. Indeed, throughout our weeks of talks, all parties have worked off a January baseline because we all recognized that we needed to start from the same place.

That is why it would be confusing to judge the current proposal’s savings from the “adjusted March 2011 baseline” which CBO released in May.

This was a way to sneak about $250 billion in phantom cuts through, and CBO went and ruined it by naming the two separate baselines.

Clearly stung by this report, Boehner is having staffers retool the bill, to achieve that $1.2 trillion in expected savings. The measure will now likely get a Thursday vote. But the damage has already been done, in all likelihood. Boehner didn’t have a ton of trust among his caucus before this debacle, and he has even less now. The far-right conservatives just don’t feel like the spending cuts will come to pass.

But more vital for Boehner, and the country, is that his plan, even if passed into law, would trigger a debt downgrade, something seen as unavoidable at this point. Now, I maintain that S&P and the other rating agencies are really crossing the line by picking winners and losers among the legislation of a sovereign nation, but the fact remains that they favor the Reid plan. Boehner remains in denial about this, and about the prospects for his own plan. But it’s not looking deniable for much longer.