Fiscal cliff aversion -- cost or savings?

Congress managed to avoid the fiscal cliff, but there is some debate over whether the deal helps or hurts the bigger budget picture.

The Congressional Budget Office scored the legislation as costing $3.6 trillion compared to "current law" -- which mandated the sequestration and tax hikes that legislators and the Obama administration were scrambling to avoid.

The Office of Management and Budget, however, sees nearly three-quarters of a trillion in savings. Jeff Zients, the Deputy Director for Management for OMB, wrote a blog entry on New Year’s Day to say that the CBO’s score “does not provide a realistic perspective on the impact of H.R. 8,” and argued that "current policy," not current law, is the proper point of comparison. This current policy assumes that “the Bush tax cuts, the AMT patch, and expiring business tax provisions will be extended; that the Sustainable Growth Rate (SGR) cuts in payments to Medicare physicians will not take effect, and that the sequestration will be turned off,” Zients wrote.

Based on this current policy, Zients pointed out that H.R. 8 would reduce the deficit by $737 billion, and would reduce spending by $107 billion. “So H.R. 8 not only keeps taxes low for the middle class, asks the wealthiest to pay for their fair share, and helps the economy continue to grow, it also reduces the deficit by $737 billion under this more realistic scenario,” Zients said.

House Oversight and Government Reform Chairman Darrell Issa (R-Calif.), meanwhile, put the price tag even higher than the CBO estimate. Speaking on the House floor on Jan. 1 before the final vote on H.R. 8, Issa said he could not support the deal because it would put $4 trillion in additional federal debt "on the backs of future generations."