Volume XVIII No. 46

Budgets are about priorities and math. But far too often, policymakers make everything a priority and dispense with math. Well, they at least like addition on the spending side, and subtraction on the revenue side, but they seem to have forgotten about the idea of equations. There's a lot of spend today, promise to cut and pay for it tomorrow. Did we tell you the one about the nearly trillion dollar farm bill that lawmakers like to trumpet as $20 billion in savings? Oh, right, we did: here and here. Okay, we don't want to beat a dead horse, except this one isn't dead yet.

The Congressional Budget Office – the numbers nerds Congress loves to hate – trotted out their “Options for Reducing the Deficit: 2014-2023” report this week. It's not going to make the New York Times bestseller list, but to TCS staff it is a riveting page turner and we're sad it was only 300 pages long. But it contains 103 options that would reduce the deficit. And that ain't all, there's another 100 options that weren't detailed because they were too small (ONLY saving $10 billion or less) or contained in another recent CBO report.

Here’s the gist –There are three paths to keep deficits from turning into insurmountable debt: Cut mandatory spending, cut discretionary spending, or increase revenues.  And CBO has presented Congress with a vast menu of options from these three deficit reduction food groups. Some are relatively small appetizer or side salad cuts, others are the steamship round of the beef carving station and the omelet king. There isn't too much dessert, because that typically is fattening and adds to the nation's budget waist line. But most importantly, there's red meat for both Democrats and Republicans and everyone has to do their part. Particularly in the case of entitlement reforms or eliminating tax preferences (breaks) where there is greater savings in the long-term, the sooner, the better.  And of course, we’d encourage Congress to choose a combination plate that includes responsible cuts and revenue raisers.

The report even details the savings associated with getting rid of (and not transferring the programs of) whole cabinet departments like Texas Governor Rick Perry suggested during the 2012 Presidential primaries. There's $55 billion from getting rid of Education and another $8 billion from Commerce, and the third? Ooops. Oh, wait, right Energy, that's about $27 billion. It also points out that eliminating these agencies outright would be difficult and might not be what the people proposing them had in mind.  For example, 75% of the Department of Energy’s budget relates to maintaining the nuclear weapons stockpile and the contaminated sites that are a legacy of cold war nuclear production. 

To be honest, virtually none of these cuts are easy. Lawmakers could limit highway funding to expected highway revenues, but that would mean less road repair funding. Or eliminate the ridiculous direct payments in agriculture (that aren't based on anything but historic land production) but aggies are adamant about wanting to waste that cash somewhere else. Or make adjustments to the structure of Social Security or Medicare in the future, but that ticks everyone off.

Another highlight of this report is that to the extent to which deficit reduction becomes “go big or go home” pursuit. If the little cuts are going to hurt a lot, you might as well make it worth your while, because the big cuts won't hurt that much more. Lawmakers should examine policies to see if they work.

While aggressive, the options CBO outlined don’t even touch some of the structural budget issues facing the country. The President’s budget submission is routinely late, opaque, and the supporting documents are scattered across the internet if available at all. The decisions underlying the budgets adopted by the House and Senate are not enforceable in other committees. And unlike businesses across the country, the federal budget is mostly accounted for on a cash basis instead of using accrual accounting which tracks the long term liabilities as well.

Policymakers spent or gave away enough cash to give the country $17 trillion in debt and a deficit that is going to expand in the second half of this decade. Yet citizens and lawmakers that wag a finger at waste in government often have the other hand out for subsidies. It's past time to have a serious discussion about what Americans want from their government and how they plan to pay for it.