Tuesday, November 30, 2010

Magic Spending Cuts

Fox News is touting a new AP-CNBC poll by loudly proclaiming that the public prefers the government balance the budget through spenindg cuts rather than by raising taxes: Poll: cut govt services to balance budget. But when you click through and actually read the article you find something quite different:

To ease surging budget deficits, Americans prefer cutting federal services to raising taxes by nearly 2-1 in a new poll. Yet there is little consensus on specific, meaningful steps — and a wariness about touching two gargantuan programs, Social Security and Medicare.
As for detailed cures, the poll shows little agreement — a problem that has long bedeviled lawmakers who often speak about taming federal deficits but seldom vote to do so. Given more than a dozen options for helping balance the budget, majorities backed just four: Reduce the number of federal workers, trim their salaries, cut overseas military bases and eliminate the tax deduction on home mortgage interest in exchange for lower income tax rates.
So as is typical with these things, the poll showed that the American public wants to eliminate the Federal deficit by taking measures that would barely put a dent in government spending while leaving the largest entitlement programs unchanged. On Social Security, for instance, the public is strongly opposed even to raising the retirement age:

There are some other interesting results, however, and some rather peculiar ones. For one thing, I'm not sure what the poll question about eliminating the mortgage deduction in exchange for lower tax rates has to do with balancing the Federal budget. As written the question seems to suggest a budget-neutral change in tax law. I'd wager that the response to the poll reflects the percentage of taxpayers who are currently servicing a mortgage vs. those who have paid off their homes or who rent.

More interesting, however, is the poll respondents' enthusiasm for cutting our foreign military presence. Given that Americans are opposed to cuts in Medicare and Social Security (even to raising the retirement age) the only big budget item still left on the table is defense spending. If the results of this poll are indicative, taxpayers are much more open to cutting the defense budget than out political leaders. This, seems to me, provides an opening for real spending reform some time down the line. I suspect the American public will have to wait for our political class to catch up, though. Defense spending is a peculiar "third-rail," more hallowed by the political class, it would seem, than by the public at large. No doubt the massive defense industry lines more than a few politicians' pockets in exchange for their fawning adoration.

Finally, though the Fox article suggests that Americans prefer cutting services to raising taxes "by a 2-1 margin" the poll actually reveals that 65% of American believe taxes "will have to be raised" to cut the deficit.

So 65% of the American Public isn't buying GOP nonsense about tax cuts "paying for themselves." This is good news for Democrats and the President... if they're paying attention. One of the most fiscally irresponsible policy decisions we could take at the moment would be to extend the Bush tax cuts for the wealthy. Sadly, the wheels of government seem to be turning in just that direction.

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