A “counterfactual” is an analysis of “what would have happened if.” President Obama’s claim that “the stimulus added as many as 3.3 million jobs” is the most famous example of this genre.
Counterfactual analysis of the effects of the 2010 election on federal spending can be executed, unlike the jobs-saved analysis, on a more solid foundation with nothing more than a pocket calculator. The procedure is simple: First, we find what the Obama administration intended to spend in 2011 and 2012 on the eve of the November 2010 election (and not knowing that an electoral disaster lay in store). Second, we compare these figures with what was actually spent in 2011 and what is likely to be spent in 2012. For example, if the administration planned to spend $3 trillion in 2011 but actually spent $2.5 trillion after the Republicans gained the House, the “counterfactual saving” for 2011 is $.5 trillion.
According to my arithmetic, the unanticipated Republican November 2010 sweep of the House with victories of fiscally-conservative freshmen saved or will save taxpayers at least $300 billion dollars for the two-year period 2011 and 2012 alone – a figure that may understate the saving by another two hundred billion.
Let’s begin in 2010 as the Office of Management and Budget prepared the fiscal year 2012 budget for the President. The Congressional mid-term elections lay ahead. This budget reveals that Obama, with continued strong majorities in both houses, intended to spend $3,818 billion in 2011 and $3,728 billion in 2012.
A confusing and bitter battle over federal spending followed in the aftermath of the Republican sweep of 63 House seats. Both sides negotiated stop-gap measures, continuing resolutions, and “grand bargains” with clear goals. The Republicans wanted less spending and no substantive tax increases. The Democrats fought against spending cuts and lobbied for tax increases. They floated proposals for a “second stimulus” and, failing that, for an infrastructure bank. The melee resembled two football teams playing on a foggy field in pursuit of a loose football. After numerous turnovers, they end up in a huge pile with the referee unscrambling the players to determine who has the ball.
In this case, we have a clean measure of which team ends up with the ball. We know that the Obama administration planned to spend $3,818 billion in 2011 and $3,728 in 2012 on the eve of the election. The OMB’s March 2012 figures reveal that $3,603 billion was actually spent in 2011 and estimate 2012 spending will be $3,627.
When we compare intended with actual spending, we get a “counterfactual” saving of $294 billion for the two-year period. Without the Republican victory, Obama would have spent $294 billion or almost $.3 trillion more.