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  • How Would You Reduce the Deficit?

    Last week, the co-chairs of the President’s deficit commission released a report of possible proposals for the commission’s final report. Recommendations included cuts to discretionary, mandatory, and defense spending as well as tax increases.

    The report was a good start to the debate and will gauge the readiness of lawmakers and private citizens to make the difficult decisions needed to reduce the deficit.

    However, the co-chairs’ proposal does not go far enough in addressing entitlement spending and also includes burdensome tax hikes and irresponsible cuts in defense. Heritage expert Alison Fraser writes that the report takes “a 50/50 approach to eliminating the deficits and lowering the projected trajectory of the debt through tax increases and spending cuts. As revenues are projected to soon return to their historical level—even if the [2001 and 2003] tax cuts are made permanent—spending is clearly the problem.”

    Some commentators claim that addressing mounting long-term deficits will require both raising taxes and cutting spending. But this week, The New York Times launched an interactive feature that allows visitors to close the federal budget gap how they see best. “You Fix the Budget” offers several options to reduce domestic spending, spending on defense, spending on health care and entitlement programs and to raise taxes. Using solely the options made available by the Times’s deficit puzzle shows that Congress could close the long-term deficit gap completely just by reducing spending.

    New York Times columnist David Leonhardt writes, “Arguably, economic growth is the most important yardstick for any plan, because growth can do much to reduce the deficit.” The economy would suffer if taxes increase to pay for runaway federal spending. Using the same economic model as the White House, Heritage’s Center for Data Analysis analyzed the President’s proposal to allow the 2001 and 2003 tax cuts to expire for those who earn above $250,000 and found that even raising taxes just on high earners would result in the loss of, on average, 693,000 jobs each year.

    On defense cuts, Fraser writes that the co-chairs’ recommendations “should draw from the Department of Defense Quadrennial Defense Review (QDR), established by Congress, which has been the traditional instrument for evaluating long-term defense needs. The co-chairs’ proposals would completely undermine the minimum capability of the armed forces to protect and defend the American people as outlined in the Administration’s own QDR.” Cutting defense spending, already at historical lows, would threaten national security.

    Instead, reducing long-term deficits should focus on spending in Medicare, Medicaid, and Social Security. The co-chairs’ recommendations take a step in the right direction, but do not go far enough. Nor do the options in the Times’s deficit puzzle. Medicare reform should include structural changes to replace current flawed policies, like those described by Heritage health policy expert Robert Moffit. Reforming Medicaid should follow the same path. Retirement savings reform should instill solvency within Social Security but also encourage greater personal savings.

    For immediate savings, Heritage budget expert Brian Riedl has compiled a list that goes beyond the immediate savings options in the Times’s deficit puzzle that would save $343 billion.

    Closing the growing long-term budget gap can be done without increasing taxes, which would hurt the economy, and cutting back on defense, which would risk America’s safety. Check out “You Fix the Budget” to try it yourself.

    Posted in Economics [slideshow_deploy]

    11 Responses to How Would You Reduce the Deficit?

    1. jdtruly, Texas says:

      The proposed increases in retirement age for social security are…well, silly. Bold steps are required which don't sandbag near retirees but make robust inroads into the problem.

      I propose for persons under 55, over 50, an immediate age 66 retirement, ratcheting up one year for every five years younger: 45-50 = 67, 40-45= 68 and so on until 72 becomes the minimum retirement age. Reasonable accommodations would have to be made for disabilities, of course.

      Elective buyouts should be explored as well.

      This is a vast problem and half-vast measures are useless.

    2. George Colgrove, VA says:

      What I would do (I consider this being turning the key to start the car there is so much more to do beyond this):

      1.Repeal ObamaCare – a simple one page – single sentance bill – (Pass law in JAN ’11, then thereafter each month – heck each week until signed by Obama – make the democrats and Obama defend it)

      2.Make 2008 tax code permanent and make it retroactive for 2010 taxes. Only add a minimum tax payment of $100 (after deductions and before credits) for all taxpayers (Pass law in JAN ’11)

      3.Make a 2-week summit with the federal government (Mostly the House of Rep) and small business (in a cheap DC hotel) to find the top 100 federal regulations to get rid of to promote business and hiring. Once defined, make a law that gets rid of ALL of them in one swoop. (Hold summit in JAN ’11 and pass law in MAR ’11)

      4.Cut congressional pay by 10% of 2008 numbers and cap congressional spending for each senate and house member. Force each memeber to seek additinal funding by their respective state legislatures. (Pass law in JAN ’11)

      5.Eliminate earmarks. (Pass law in JAN ’11)

      6.Make a blanket cut to the entire federal government (federal workforce and federal spending by 10% – including the DoD but only on administrative parts and weapon systems that are not working or not wanted by soldiers.) Positions created after 2008 should be targeted for initial removal. The only protected class shall be the uniformed field and field ready soldiers. (Pass law in JAN ’11)

      7.Consolidate and privatize the ALL the common functions of each department (i.e. human resources, open government initiatives, payroll, etc). Every similar function listed on all the different departmental websites should provide guidance. These functions should be administered by GSA and serviced in the private sector. (Pass law in JAN ’11 and complete implementation by JUN ‘11)

      8.Make a law that bans the appointment of CZARS and make it retroactive to 2008. Empower departmental heads to resume the tasks taken from them by the czar appointments.

      9.Reduce the federal pay and benefits to 2008 levels and freeze until redundant private sector studies has been completed to ensure public workers are being paid fairly to what the private sector are being paid. At that point, benefits and compensation for federal workers should be indexed to the private sector for job class and time in service. (Study completed by MAR ’11 and new unified pay system implemented by JUN ’11 to coincide with the shift to a private sector pay system)

    3. Mr. H., Indianapolis says:

      Let us go back to the constitutional powers of governance. From this reference, we go through the practically infinite list of things our taxes are spent on, and not fund those that do not fall within the constitutional powers of governance. NPR, CPB, NEA, and all the other things that are really the province of charity, and or philanthropy. We also need to use sound science for making policy, rules and regulations. Science is not consensus. Science is not to be distorted by agendas. Sound science is honest analysis of fact and data. We need to get governance out of business. Governance is incompetent in the conduct of business. For example, Medicare is a major business failure, riddled with fraud and costs out of control. Taxes are not effectively used to support policy. We should tax consumption, not production or financial success. It is equal opportunity, not equal outcome.

    4. Mike, Cupertino, CA says:

      What's the point in showing a graph labeled in dollars? It would be much more informative if spending and revenue were in percent of GDP.

    5. Daniel says:

      Heritage wants a $.7 TRILLION a year defense budget every year. Yes Heritage, you suggested that.

      Heritage wants to extend the tax cuts for the rich that take around $.17 TRILLION a year from federal revenue and that's not including interest.

      Well Heritage, that's $.87 TRILLION right there! .Almost a Trillion dollars, every year, from here on out!

      Yea, spending is a problem too. Just make sure to include tax cuts for the rich(that created which jobs again?)and fighting endless wars(that we have actually won?).

      "the President’s proposal to allow the 2001 and 2003 tax cuts to expire for those who earn above $250,000 and found that even raising taxes just on high earners would result in the loss of, on average, 693,000 jobs each year"

      -LIE(they provide no evidence as to how that will actually happen)

      "Cutting defense spending, already at historical lows"

      -LIE(100% Lie, defense spending is the highest it has ever been..700 billion for defense…ahem….)

      "Closing the growing long-term budget gap can be done without increasing taxes"

      -LIE(to reduce defecits, you raise taxes. In no point in history has any President been able to lower the deficit without rasing taxes, even if it's a slight increase)

      Here are a few facts. Ya know, legislative,economic and numerical historical facts…

      -5.5 Trillion was added to the National Debt from 2000-2008

      -Bush and Reagan were the only two Presidents to double the National Debt

      -2.5 Trillion ripped from Federal Revenue since the tax cuts became public law

      -.5 Trillion for unfunded Military Contracts for "Operation Iraqi Freedom"

      -93% of all legislation from 2006-2008 was of Republican sponsorship, regardless of the "Democrat Majority"

      -85% of the Housing Market Share was controlled by private lenders from 1999-2009 with bottom line losses in 2008/2009 around 1.69 Trillion

      -not a single bill for Housing Regulatory reform was passed during 12 years of Republican Congressional control

      -Heritage supported the Healthcare mandate back in 2003

      I could go on and on and on and on and on and on, but Heritage will either decide to not post my comment or just spin facts. It's truly pathetic that people take this website for credibility. I mean, it's not even CLOSE to facts. It has become insane! Though, I do find it ammusing to check this website out from time to time.

    6. Kevin H, College Par says:

      I don't know how you and Alison can state it's a 50/50 split between spending cuts and revenues. It's much closer to 75% spending cuts and 25% revenue raisers.

      If the $4tillion the plan projects to save over the next 10 years, roughly 3trillion is in spending cuts and $1trillion in revenue raisers.

      I don't know how you can read the proposal and outline and come up with 50/50.

    7. Redfray, Arkansas says:

      Most people would not like my way of balancing the federal budget. The dollor is in trouble and close to bandruptcy, time to cut all unnecessary spending: No earmark money, freeze all federal hiring in all departments, NO extra travel, No free jets, No special apartments, No mandatory spending on any nation (including United Nation), No federal money or assets to foreign countries, No cost plus contracts, reduce all federal agencies by one third, bring all soldiers home from over seas, remove all tax free exemptions, and half of all contributions to elected officials goes to pay-off the federal debt.

    8. Dr dbiggs,CA says:

      Pres OBOZO: "Tea Bagger-in-Chief"

      You Can LIE but can you READ?

      Invasion by illegal ie "Criminal Aliens"

      Obviously you have never read the United States Constitution or

      else feel that in your ivory tower and wealth that it does not apply to you!!

      I feel you need to read the following and act according to the peoples wish

      not your wishes or special interests wish list!

      There are three references to the words "invasions," "invaded," and

      "invasion" in our U.S. Constitution:

      Article I, Section 8: "The Congress shall have Power To Provide for calling

      forth the Militia to execute Laws of the Union, suppress

      insurrections and repel Invasions."

      Article I, Section 10:"No State shall, without the Consent of Congress, lay any

      Duty of Tonnage, keep Troops, or Ships of War in time

      of Peace, enter into any Agreement or Compact with

      another State, or with a foreign Power, or engage in War,

      unless actually invaded, or in such imminent Danger as

      will not admit of delay."

      Article IV, Section 4:"The United States shall guarantee to every State in the

      Union as Republican Form of Government, and shall

      protect each of them against invasion, and on

      Application of the Legislature, of of the Executive (when

      the Legislative cannot be convened) against domestic

      Violence."

      Your Oath of Office and sworn duties as referenced mean you must Act and

      put a Stop to the Invasion of all the Illegal immigrants we are experiencing.

      Our U.S. Constitution mandates that invasions shall be repelled by Congress.

      and that means the persons in the House of Representatives and the U.S.

      Senate. Our nation's sovereignty must be protected.

      How can you even stand in front of a mirror and even look yourself in the eyes

      knowing you are a "Bought & Paid Hoe" for special interests and the

      Democratic Party Hacks? Tell me I am wrong, please because I fear for the

      future of our country as you certainly don't care about the people or our

      country!!

      You go to the SAME PLACE for LYING as you do for STEALING!!

    9. Tom D, Flat Rock NC says:

      Step #1 is to replace the current tax system with a system that is adequate to give a chance to the long-term sustainability of the precious entitlement programs. The only prayer we have to survive economically as a nation is to broaden the tax base so that everyone is paying something (e.g., similar to the Fairtax system). For those that don't agree that taxing the rich at higher rates negatively affects jobs, try going out and taking the risk to start and run a business. The less financial incentive (upside) that a person has, the less risk that a person will take (to run / expand a business and create jobs). The liberal utopian idea that everyone can or should make the same amount of money and that society will still be able to maintain its current standard of living is ignorant.

    10. anthony p. sabatino says:

      Eliminate all czars position and salaries

      Change heath and benefits for senate and house to reflect what average citizens have

      Reduce the number of senate and house representatives

      Place cap on free wheeling spending and abusive travel of President and respective entourage

    11. Dan says:

      Change the culture in Washington to one of spending to one of saving by incentivizing all members of Congress and government employees to reduce expenses below what they spent the prior year.

      Yes, Congress will make more money, but only if they reduce spending. If they save $1B, then give those directly responsible an extra $100K. This article goes into further detail: http://www.danielwhansen.com/article.htm

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