So You Want To Reduce The Deficit? This Is Where To Start

In this Jan. 21, 2018, file photo, lights illuminate the U.S. Capitol. (J. Scott Applewhite/AP)
In this Jan. 21, 2018, file photo, lights illuminate the U.S. Capitol. (J. Scott Applewhite/AP)

Were I president, and a bill reached my desk eliminating the National Endowments for the Arts and Humanities, as President Trump has proposed, I’d sign it — if for no other reason, to bug the hysterics behind headlines like “Trump’s budget is a death warrant for the arts.” (All arts, even kindergarten finger-painting?)

But I wouldn’t waste time actively pursuing such a bill. At about $300 million a year, the Endowments’ budgets aren’t a drop in the federal bucket, they’re a microbe. (The New York Times has a compelling visual depiction of that fact.)

Not that the federal deficit isn’t a concern, as even progressive economists acknowledge. Trump’s tax bill needlessly worsened our red ink at a time when, with the economy chugging at full throttle, we should be paying down debt, which also is a moral imperative, as younger Americans gripe about holding the bag for previous generations’ spending.

But fiscal conservatives who can count would cut where the real money is. And one sentence tells you what you need to know: The federal government is “a giant insurance company with an army.”

The line, beloved by economists, alludes to the bulk of federal spending that’s consumed by defense and social insurance programs — Social Security, Medicare and Medicaid. Cutting the deficit means going after those big-ticket items. Given the coming insolvency by 2034 of Social Security and Medicare, fixing those is obligatory.

Fortunately, that’s easy arithmetically, if not politically.

Start with the insurance programs. Martin Feldstein, Harvard economist and Ronald Reagan’s economic adviser, recalls the Gipper’s 1983 rescue package for Social Security, which raised the retirement age. He suggests another bump up in light of increased longevity since then, wisely making exceptions for those in hard labor jobs or with low earnings (since poor Americans are dying earlier and shouldn’t have to wait for Social Security benefits they’ll never live to see).

Feldstein neglects to mention that Reagan also raised the payroll tax to bolster Social Security. Given the absurdly low cap on income subject to the tax, raising that should be another deficit-tackling tactic.

On Medicare, Feldstein notes that while 95 percent of beneficiaries receiving outpatient or drug treatment pay premiums, those cover only a quarter of their benefits’ cost. Starting next year, those making half a million bucks annually or more will see a premium increase, but that affects just 1 percent of recipients. Feldstein suggests raising premiums for most recipients, exempting the poor, and imposing premiums on high-earners for inpatient care, for which Medicare doesn’t charge premiums.

Fine as far as it goes, though again, he’s mum on another sound idea. As his liberal colleague Paul Krugman has noted, we’d spend less in the future on Medicare and Medicaid (and on private insurance) if we arrested the upward march of U.S. medical prices, already the highest in the world. Single-payer countries use government to negotiate good deals on medical prices. In places like Germany, which has private, multiple insurance plans as we do, insurers and providers jointly sit down so the former can negotiate good deals, with the government setting prices as the fail-safe.

Either deficit hawks get behind a move toward the Germans’ system, or they can watch an American public that, staggering under medical debt, increasingly embraces single payer.

Having reformed the federal insurance “company,” we should go to work on the army. We can keep the country safe while trimming our largest-on-the-planet defense budget that spends as much as the next half dozen or so countries combined.

Military experts have suggested cuts for years; I’ll mention just two: scrapping intercontinental ballistic missiles, the land-based leg of our nuclear defense, rendered unnecessary by modern technology; and ending the Afghanistan war, which we haven’t won after longer combat than the Second World War.

Trump, of course, abandoned his campaign vow to bring the troops home from Afghanistan. And, of course, he wants to raise the military budget. Of course, having expanded the deficit with his tax cut, he clearly sleeps well while floating on red ink.

I’d add one more big arrow to our deficit quiver. Real tax reform — not the GOP’s Pay Day for Plutocrats bill — would purge the tax code of credits and deductions (including popular ones that foster inequality), expanding the ranks of those who pay taxes. With more revenue rolling in, we could debate how much should go toward lowering rates, toward actually necessary federal spending and toward the deficit.

Plus, we’d have a code so simple as to put the tax prep industry out of business. Sparing our children from paying our debts and an easier time on April 15: Surely some ambitious presidential candidate could run on that.


Headshot of Rich Barlow

Rich Barlow Cognoscenti contributor
Rich Barlow writes for BU Today, Boston University's news website.



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