March
2011

 

By
Larry DeBoer
 
Professor of
Agricultural Economics
Purdue University

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03-24-11

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Deficit Numbers and Poll Results


The federal budget deficit is enormous, and the national debt is growing. So the pollsters are asking the public what should be done. The latest poll I've seen was done for NBC and the Wall Street Journal at the end of February. I found it on the Web by searching "NBC deficit poll."

The poll said that Americans are really concerned about the deficit and debt. Eighty percent think the deficit would affect them personally, quite a bit or a great deal. But what to do?

Fortunately, the Congressional Budget Office has just issued a big report called, "Reducing the Deficit: Spending and Revenue Options." You can find the report on the CBO's website, http://www.cbo.gov. The report looks at the future of the deficit under several assumptions about what policymakers will do. It concludes that the deficit needs to be cut by about $700 billion, just to keep the national debt from rising as a share of the economy.

Maybe we should cut spending. But the poll says that a majority oppose defense-spending cuts. Two-thirds oppose cuts in Medicaid, the health care program for low-income people. Three-quarters oppose cuts to Medicare, the health care program for retired people. Three-quarters oppose Social Security cuts. And we can't stiff our creditors. The poll didn't even ask whether or not we should cut interest payments on the debt.

That leaves spending cuts in other entitlements and domestic and international programs.

We need more CBO numbers, this time from its January report on the budget outlook. Total federal spending was about $3.5 trillion in 2010. Of that, $701 billion was on Social Security, $520 billion was on Medicare, $273 billion was on Medicaid and $689 billion was for defense. Interest payments consumed $197 billion. According to the poll, this $2.4 trillion in spending is off the table for spending cuts.

What remains is $416 billion in other entitlements, such as unemployment insurance and welfare; $614 billion for domestic programs, such as agricultural subsidies, national parks and NASA; and $46 billion for international programs.

The CBO says we need $700 billion in deficit reduction. With the big programs out-of-bounds, we'd have to cut the remainder by two-thirds to stabilize the debt. If we don't touch the other entitlements -- and the poll said a majority oppose cutting unemployment insurance payments -- we could completely eliminate everything else and not quite solve the problem. Either way, we're not going to do that.

Maybe we should raise taxes. The poll asked about a few tax options. A majority supported higher taxes on people earning a million dollars or more and fewer tax breaks for those with incomes over $250,000.

Now we need data from the Internal Revenue Service's website, http://www.irs.gov, at the "Tax Stats" link. In 2008, the latest data, people with incomes over $200,000 paid half of all income taxes -- $540 billion. That's as close as we can get to the poll question. To get to that $700 billion deficit number, rich folks' taxes would have to increase 130 percent -- doubled, and then some. We're not going to do that either.

When we match the budget numbers with the poll results, it looks like Americans have not come to terms with the changes that must be made to deal with the deficit.

But it's probably a mistake to view public opinion as if it was a proposal by a single person. For example, suppose one-third of the public want to solve the deficit problem with spending cuts and another one-third think taxes should be raised. The last third aren't worried about the deficit, so they don't support changes in taxes or spending. There's disagreement, but everyone has a plan.

The poll results would show that two-thirds of the public think that the deficit should be reduced, yet two-thirds don't want taxes raised and two-thirds don't want spending cut. That makes it look like Americans want the deficit closed but aren't willing to face up to budget facts. But in this example, that's not true.

Pretty clearly the poll shows that we don't have a majority supporting a realistic plan to solve the deficit problem. Maybe we're unwilling to face facts. Or maybe we just disagree about what to do.

 

Writer: Larry DeBoer,
Editor: Olivia Maddox,