Sec. Timothy Geithner included the phantom savings from the Iraq and Afghanistan wars in his argument for how President Barack Obama plans to reduce the U.S. deficit going forward in interviews Sunday on the ongoing fiscal cliff negotiations.
Fox News’ Chris Wallace challenged Geithner on the point, calling it a budget gimmick:
WALLACE: Savings from the wars we never going to fight?
GEITHNER: No, that’s not true. We’re winding down two wars–
WALLACE: I understand that. You’re taking savings that no one ever thought you were going to spend that money anyway. It’s a budget gimmick, sir.
GEITHNER: No, that’s not right. Let’s say it this way: Those were expensive wars…when you end them, as the president is doing, they reduce our long-term deficits. And, like in the Republican budget proposals, the world should reflect and recognize what that does in savings. And we propose to use those savings to reduce the deficits and help invest in rebuilding America. We think that makes a lot of sense.
WALLACE: But it was money that wasn’t going to be spent anyway.
GEITHNER: If those wars had gone on, it would have been spent.
WALLACE: I understand, but you’re not ending the wars for budget purposes, you’re ending the wars because of the foreign policy reason. The wars weren’t going to be fought; you’re not really saving money.
Earlier this year, the Washington Post’s Glenn Kessler called the supposed war savings “phantom savings,” and wrote that, when it comes to these and other so-called savings, “fake money is being used to pay for real spending projects.”
As noted by BuzzFeed Sunday morning, Geithner has admitted this point himself. According to Bob Woodward’s book, The Price of Politics, Geithner argued the administration needed to portray the lower expenditures as savings to make the “overall total look bigger”:
Geithner said that the savings from winding down the wars in Iraq and Afghanistan – the overseas Contingency Operations fund – should be counted in the grand total. He conceded that this wasn’t real savings, but it was a peace dividend and it made the overall total look bigger. “We need to have this because the ratings agencies and markets believe in this stuff.”