Cutting the Deficit: Washington’s Latest Parlor Game
Policy + Politics

Cutting the Deficit: Washington’s Latest Parlor Game

With the government’s total debt now just above $13 trillion and likely to eclipse the country’s gross domestic product by 2012, just about everyone has an idea for how to tame the deficit. It all looks so easy until you actually try it.

Call it Washington’s new parlor game.

It seems as if every other think tank has concocted a scheme for reducing the red ink – or a clever interactive game for making the tough choices. House minority whip Eric Cantor, R-Va. got into the game by posting on the Internet his own version of a deficit-cutting game called “YouCut.” Constituents and others are invited to log on and “vote” on a set of budget reduction items chosen by Cantor, such as eliminating a 1.4 percent pay raise for federal workers.

Cantor boasted the proposal could save the government $2 billion a year, and last month he put it to a test on the House floor. “This is just the kind of vote we must make to get us off the path to financial ruin,” Cantor said. But the measure went down with a thud, 227-183. Three Republicans voted against it, including fellow Virginian Frank Wolf, whose suburban district outside Washington, D.C. is home to thousands of government employees.

The House recently voted on another “YouCut” idea — this one to eliminate a small welfare program aimed at enabling states to place 186,000 unemployed individuals in subsidized jobs by the end of this summer. Cantor declared that cutting the program would save $2.5 billion a year, but liberal groups rallied against his proposal, and the program remained popular with lawmakers as a way to put people to work in a recession. The House soundly rejected it by a vote of 240-177.

Need to Have, Nice to Have — Will Congress Make the Cut?
As President Obama’s bipartisan fiscal commission attempts to assemble a plan for sharply reducing the deficit in the coming decade, experts agree there’s not a lot of mystery about what needs to be done: slow the rate of growth of Medicare and Social Security; cut discretionary domestic spending and wasteful defense programs; and increase revenue by raising taxes or closing loopholes. But proposing these changes is one thing; forging a political consensus to overcome special interest opposition is a much different matter.

The Committee for a Responsible Federal Budget, a deficit-reduction advocacy group, has devised an intricate budget simulator that allows participants to pick government programs to cut. The choices include enacting all of President Obama’s proposed cuts in military weapons spending. Among Obama’s targets: the $2.9 billion alternate engine for the Joint Strike Fighter (JSF), which Defense Secretary Robert Gates says is unnecessary.

So that should be an easy cut to make, right? Hardly. The engine currently is manufactured by Pratt & Whitney; the expensive alternate engine is being jointly built by General Electric and Rolls-Royce. The two sides have engaged in a very aggressive, high-profile public relations campaign in recent weeks, with several members of Congress, including Rep. Steve Buyer, R-Ind., arguing that hundreds of jobs are at stake in Indiana, Ohio and Massachusetts — states where the alternative engine is produced. The House voted 231-193 late last month to retain the alternate engine.

“In the political cost-benefit process, it never quite works out if you go through the budget and cut line by line,” said William Galston, a longtime budget analyst at the Brookings Institution, a Washington think tank. “That just mobilizes the enemies at the threshold and stops you cold.”

Another Committee for a Responsible Federal Budget plan is to raise the Social Security retirement age to 68 (it’s currently on its way up, in steps, from 65 to 67) and replacing traditional Medicare for seniors with a voucher program. Sen. Judd Gregg, R-N.H., a presidential commission member, has suggested the retirement age is a good place to start to save money. But that approach is fraught with peril — not the least of which is that there is a higher percentage of active voters among the Social Security age group than any other demographic.

Maya MacGuineas, president of the Committee for a Responsible Federal Budget, said her group’s budget exercise is designed for a dual purpose: to teach people budget realities (cutting foreign aid in half won’t cure the deficit, for example, since it only saves $110 billion over eight years) and to advise policy makers of public opinion. But she said the smorgasbord of choices won’t solve the deficit problem alone, because it doesn’t take into account political realities.

“The only way that it’s easy is if you turn a blind eye to lobbying or political constituencies,” she said, “but that’s probably the best way to think of this.”

MacGuineas’s group receives funding from the Peter G. Peterson Foundation. Pete Peterson finances The Fiscal Times, an editorially independent digital news publication and business venture.

The Congressional Budget Office last year published a couple of documents that outlined hundreds of potential budget cuts and tax increases, The document listed everything from agriculture (cut crop price supports)  and airports (cutting government subsidizes to large and mid-sized airports) to zeroing out subsidies for the District of Columbia at a savings of $2.1 billion.

It’s not just spending cuts that will save money — increasing taxes on the other side of the ledger is a way to cut red ink as well. But again, taxes are a hot political potato. If the government were to implement a “carbon tax” on fuels, it could raise $300 billion over eight years; a 5 percent Value Added Tax on the value of goods and services would bring in $630 billion over eight years; and a simple raising of the gasoline tax by 10 cents per gallon would garner $80 billion in that time period, according to estimates.

Raising the cap on the amount of earnings subject to the Social Security tax up to 90 percent of earnings would bring in $420 billion, while a “soak the rich” surtax on earnings over $1 million a year would raise $190 billion over eight years.

But taxes are a highly contentious issue among the fiscal commission members, with some Republicans adamantly opposed to any significant tax increase to help close the budget gap. Galston says commission members should plow through the stacks of proposals for spending savings, but take many of them with a grain of salt. “All of that stuff is technically on the table, but how much of that stuff is really on the table?” he said.