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Do Americans Really Want (Even More Than) 100% of Deficit Reduction to Come from the Spending Side?

July 18th, 2011 . by economistmom

NPR’s Frank James reports on two recent polls that cast doubt on the popularity of the Republicans’ position:

A new CBS News poll suggests that while none of the Washington political players gets the approval of a majority of voters for how policymakers are handling the debt-ceiling debate, congressional Republicans fare the worst.

The survey found only 21 percent of respondents approved of the actions of congressional Republicans while 71 percent disapproved.

That compares with President Obama’s approval-disapproval ratings of 43 percent versus 48 percent.

For the record, congressional Democrats’ approval-disapproval numbers were 31 percent versus 58 percent.

The CBS News survey lined up with a recent Gallup Poll that suggested that more voters support Obama’s position that deficit reduction be achieved through a combination of tax revenue boosts and spending cuts instead of just spending cuts alone, which is the current Republican position in the debt-discussions.

The Center on Budget and Policy Priorities’ Bob Greenstein here explains the implications of the Republican “Cut, Cap, and Balance” proposal that the House will take up on Tuesday.   He makes this key point about the degree to which spending would have to be constrained under the proposal (emphasis added):

The “Cut, Cap & Balance” measure cites three constitutional balanced-budget amendments (H.J. Res 1, S.J. Res 10, and H.J. Res 56) and states that Congress must approve one of them or a similar measure before the debt limit can be raised.  All three of the cited proposals would require cuts deeper than those in the Ryan budget. All three measures would establish a constitutional requirement that total federal expenditures may not exceed 18 percent of GDP, and all three would essentially require that the budget be balanced within the coming decade.

In other words, this proposal makes the often-called “draconian” Ryan proposal look like bleeding-heart liberalism.

The Republicans fixate on the 18 percent spending ceiling because they think that’s the right level of revenues for the foreseeable future; after all, if it was good enough on average for the past 40 years, it must be good enough for the next 40 years.  (Never mind that it wasn’t even “good enough”–i.e., “enough”–for the past 40 years.)

But if we really were to hold total spending to 18 percent of GDP and balance the budget, this would imply that more than 100 percent of deficit reduction would be coming from the spending side.  Because as CBO reminds us (in their long-term budget outlook), under current law revenues are projected to rise to 21 percent of GDP in 10 years and 23 percent of GDP in 25 years.  Even under CBO’s “alternative fiscal scenario” where current tax cuts are permanently extended (and deficit financed), revenues would still rise to slightly above 18 percent of GDP (18.4 percent) in 10 and 25 years.  (See Table 1-2 on page 8 of their report.)

How large of a spending cut are we talking about?  The same CBO table implies that relative to current law, spending in 25 years would have to be cut by over a third (from 27.4 percent of GDP down to 18 percent).  And relative to current policy extended, spending in 25 years would have to be cut by nearly one half (from 33.9 percent of GDP down to 18 percent).

Do the Republicans really think this is a winning proposal to make to the American people–a cost we should all be willing to bear for the sake of continued and additional tax cuts?  Even without the Republicans having spelled out how on earth cuts of this magnitude would materialize, Americans seem to already be saying “no.”

13 Responses to “Do Americans Really Want (Even More Than) 100% of Deficit Reduction to Come from the Spending Side?”

  1. comment number 1 by: Patrick R. Sullivan

    This is an exceptionally disingenuous post. The problem we have is that the past half century average of federal spending in the US has been 20% of GDP, while revenues (under a wide variety of tax codes) has been a little over 18%.

    The idea that the American people are saying anything about the advisability of spending 27%, much less 33% by the federal govt is bizarre.

  2. comment number 2 by: cutBS

    The CBS poll dramatically over-represents Dems and under-represents Reps, if you care about facts ….

  3. comment number 3 by: Patrick R. Sullivan

    Keith Hennessey has a more reasonable explanation of what Republicans are proposing here:

    http://keithhennessey.com/2011/07/18/understanding-cut-cap-and-balance/

  4. comment number 4 by: Underwriterguy

    If asked in a poll, I would advocate increased taxes on “others,” who can afford it, and no decreases in my gov’t goodies. Seems dumb to expect any other answer in a random poll.

  5. comment number 5 by: Eric

    Patrick: one question.

    What’s so magical about government outlays totaling 20 percent of GDP? Is 21 percent of GDP the end of the free market as we know it? 22 percent? 23 percent? At what GDP percentage of federal outlays should I don my red hammer and sickle t-shirt?

    Conversely, what’s so magical about 18 percent of revenues as a percent of GDP, especially given our *chronic* inability to reduce spending to meet the average revenue level? At what point do we admit to ourselves, “You know, this 18 percent thing, it doesn’t seem to be paying for everything Americans want. Maybe we should shoot for a more realistic number rather than pretending that one day, some day, we’ll actually get spending down to 18 percent of GDP to equal revenues.”

    Maybe you haven’t noticed, but Americans are getting older, which costs the government money–certainly more than the 20 percent of GDP we’ve been accustomed to over the past several decades.

    But, again, I have to ask: why are 40 or 50 year spending/revenue averages appropriate GDP targets for *today*? Why? We aren’t living in 1982 anymore. So what is the underlying economic rationale of adhering to an essentially arbitrary GDP average based on outdated demographics and unrealistic targets that we’ve consistently failed to meet over the past half century?

  6. comment number 6 by: Patrick R. Sullivan

    Eric, 50 years or more is known as a long run trend. Why change what has been successful and made us the envy of the world?

  7. comment number 7 by: Anandakos

    Patrick,

    “The envy of the world?” ROTFLMAO!!!!! Maybe forty years ago. Now it’s more like “the pariah of the world”. With the exception of Taiwan, Israel, and the southern part of the UK (basically, out client states), all over the world majorities of countries of all stripes have a dismayingly poor but accurate opinion of the United States.

    We are seen as narcissistic, moronic pigs who can’t pause in our obese hyperconsumption long enough to have a clear thought about the future. Or even the present.

  8. comment number 8 by: Vivian Darkbloom

    It strikes me that the coverage of the “Cut, Cap and Balance” measure here is very misleading. That’s often what you get when your source of information is the CBPP That measure is HR 2560, a fact that should have been reported in this column with a link to the bill itself. For the benefit of readers, here it is:

    http://rules.house.gov/Media/file/PDF_112_1/legislativetext/HR2560%20ct.pdf

    Contrary to the distinct impression created here by Economist Mom (and others), this bill does *not* require spending to be cut to 18 percent of GDP. Rather, it requires that no bill be entertained in the House or Senate that would consider spending in excess of the following:

    ‘‘SEC. 319. ENFORCING GDP OUTLAY LIMITS.

    ‘‘(a) ENFORCING GDP OUTLAY LIMITS.—In this section, the term ‘GDP outlay limit’ means an amount, as estimated by OMB, equal to— 1) projected GDP for that fiscal year as estimated by OMB, multiplied by ‘‘(2) 21.7 percent for fiscal year 2013; 20.8 percent for fiscal year 2014; 20.2 percent for fiscal year 2015; 20.1 percent for fiscal year 2016; 19.9 percent for fiscal year 2017; 19.7 percent for fiscal year 2018; 19.9 percent for fiscal year 2019; 19.9 percent for fiscal year 2020; and 19.9 percent for fiscal year 2021.

    So, the actual limit is phased in and does not go below 19.9 percent. If the Republicans were so “fixated on 18 percent” would they not have included that figure here? So, where does the 18 percent come from? It comes indirectly from a requirement in the bill that the Senate and House pass a Constitutional Amendment Resolution that is similar to three previous proposed resolutions which referenced an 18 percent limit. The bill does *not* impose an 18 percent GDP spending limi which this post blithely attempts to obfuscate by merely citing a source that references obliquely “or similar resolution”. HR 2560 only requires that the House and Senate pass resolutions that contain constitutional spending limits based on a percentage of GDP (*any percentage*). It is clear to this reader at least that an 18 percent limit would never pass the House and Senate (much less two-thirds of state legislatures); however, resolutions containing a higher limit (20 percent?) would have a better chance. And, importantly, nothing in the bill requires that such a provision succeed in amending the Constitution—it merely requires that such an Amendment be presented to the states for ratification. If such an Amendment were to be presented to the states and fail to be ratified, the substantive provisions of the bill would still have effect, albeit an effect that could be overridden by statute.

  9. comment number 9 by: Eric

    Patrick,

    Please, by all means, remind me how many times we’ve balanced the budget over the past 50 years. Let’s ask China whether or not they envy us when we stop paying interest on the Treasury securities they own, shall we?

  10. comment number 10 by: AMTbuff

    It is well known that deficits of 2% of GDP are fully sustainable as long as the economy grows more than 2% per year. So revenues of 18% of GDP are compatible with spending 20% of GDP.

    The problem in the past has been phony accounting for pension liabilities and such. These need to be fully accounted for in that 2% deficit.

  11. comment number 11 by: ST Dog

    The actual number isn’t as important as there being a number at this stage.

    They problem thus far has been that spending keeps increasing without regard to revenue. And Projected revenue is budgeting 101.

    If you don’t know how much you have to spend how do you decidede what to spend it on?

    The current method has been to pick numbers that sound good for spending with out regard to the revenue available. How else do you end up borrowing nearly half of what you spend?

    It’s one thing to borrow a bit here or there, then work on paying it back. But anther thing entirely to keep borrowing more and more with no plans to limit spending in such a manner as to stop borrowing and start paying it back.

    If there was some thing that encourged me to think the debt would be reduced then I would support revenue increasing measures. But at this point all I expect is for them to increase spending buy at least that much.

    I just don’t see throwing good money after bad. We’ve done that for decades.

  12. comment number 12 by: Patrick R. Sullivan

    Anandakos, if what you say is true why are we the destination of choice for so many emmigrants?

    Eric, your comment is irrelevant. Who says we’d balance our budget if we spent even more?

  13. comment number 13 by: Shadowfax

    Great to see these poll results. Now we know the electorate isn’t a bunch of fools, even though some of them voted Republican. Let’s see if we can get a comprehensive deal done:

    1) Expiration of the Bush tax cuts;

    2) Putting Social Security on sound footing by a combination of raising the retirement age, removing the cap on the payroll tax, reducing the annual cost of living adjustment, and raising the payroll tax rate. A little of each goes a long way.

    3) Attacking the healthcare cost drivers: obesity via fat taxes, fraud via better auditors and systems; defensive medicine via tort reform, a shortage of doctors and nurses via education support, etc.

    4) Cutting defense in half over ten years, back to Clinton levels around 3% GDP.

    5) Eliminating say $350 billion of the $1.2 trillion in annual tax expenditures, as progressively as possible.

    6) Cutting non-defense discretionary budgets by about 10% and freezing them there for a decade.

    That is a start that should keep us from a debt-related debacle.