Lehigh University
Lehigh University


Last-Minute Advice for Deficit 'Super Committee'

It's unlikely the bipartisan congressional "super committee," charged with reaching an agreement on a package of deficit reductions, will meet its Nov. 23 deadline. The committee worked for months to find compromise on reductions manadated by the Budget Control Act of 2011. While President Barack Obama and congressional leaders trade blame for the committee's failure and decide their next move, Lehigh financial and political science experts offer their ideas for reducing the national deficit by a minimum of $1.2 trillion over the next decade.

'Where's the waste?'
Frank Gunter, associate professor of economics:

In addition to a temporary governmental hiring freeze, I believe that the federal government has taken on too many responsibilities that traditionally were the duty of local government. For example, the agriculture programs of the U.S. federal government were intended to help farmers through hard times. You don’t want to cut a program when people are in trouble. But farmers right now are going through a boom. It’s time to close the doors of the Department of Agriculture.
Where’s the waste? There are potentially up to four dozen poverty programs run at the federal level. Some of them cost a lot of money and aren’t having a noticeable impact on poverty. So as a first step, pull together all the poverty programs spread across half a dozen departments in Washington into the same department and save on administrative costs.
What about the Bush era tax breaks? The problem we have with the exploding deficit of over a trillion dollars was not that we lowered taxes; we were continuing to collect about 19 percent of gross domestic product in taxes and that’s been the trend for at least the last 20 years. What has happened is the explosion in government spending. Government spending is now up to about 25 percent of GDP.
There is concern on the right that any tax increases will be permanent and that the intent is to move America to a permanent tax level of 25 percent, which admittedly is not at European levels (40 percent), but is a step in the wrong direction. I think a lot of American people are saying that the problem isn’t that we aren’t being taxed enough.
The American tax system: I’m university educated. I’ve had accounting courses. I’ve taken a course in filling out tax returns. I’m unable to do my own taxes. We have created a tax system here that is so complex that only insiders understand it and only insiders can benefit from it. In an average year Americans spend about one half trillion dollars filling out their tax returns. If we could simplify our taxes and reduce tax preparation costs to just 100 billion dollars, that would mean 200 billion dollars more in people’s pockets and the government’s.

'We need to focus on the needs of the nation as a whole'
Ted Morgan, professor of political science

To start with, I don't accept the framework posed: "What would you select for reduction" to enable the Select Committee to trim the deficit by $1.2 trillion over the next decade? The question implicitly accepts the right wing's framing of how the government should respond to the contemporary situation; yet it is this very right wing (and corporate) agenda that has sent the United States on a downward spiral for decades. We ought to be asking what we need to do to get America back on a more constructive and democratic track.

The deficit is the result of government expenditures exceeding government revenue, so there are two ways to approach its reduction: cutting spending and increasing revenue. I would first increase revenue by rescinding the tax cuts for people with income over $250,000. I would also seek to enact other features of "The People's Budget" proposed by the 81 members of the Congressional Progressive Caucus last spring: progressive taxation of estates, a millionaires surtax and/or additional tax brackets for the rich. I would seek to control health care costs by mandating government negotiation of prescription drug prices and make deep cuts in both the wartime and base line military budgets, though I would make sure there was adequate funding to provide for the health care of our damaged veterans.

The second issue is that reduced government spending or increased government taxation may well prolong or deepen the recession we are in. Former Vice President Dick Cheney stated that federal deficits were not a problem when the Bush administration was in power, but now the Republican right wing has manipulated media discourse so deficits have become a dominant issue linked to allegedly high-spending Democrats. In partisan political terms, the hidden agenda here is that a prolonged recession will help the Republicans' chances of regaining the White House and Senate in 2012, as will the "voter ID" laws Republicans have been passing in several states.  This is the kind of politics the American people are fed up with. We need to focus on the needs of the nation as a whole - economic, ecological, and social - and we have a very long way to go to get back on track.

'Start thinking in terms of investments'
Yung-Yu Ma, assistant professor of finance:

I would like to see a greater focus on the investment merit of the budgetary items. We should try to get away from thinking in terms of government expenditures and cuts and start thinking in terms of investments.

Is subsidizing cotton growers in California via the Farm Bill a good investment that is worthy of our collective tax dollars?  How about corn and soybean growers in Iowa? What is the expected payoff from these investments and how does it compare to the potentially negative consequences of disrupting natural market forces?

My impression is that these are poor investments, but for those who feel otherwise let’s base the argument on investment merit with cold, hard data.  Conversely, are we able to justify a greater expenditure on K-12 math and science education based on investment merit? If so, and if it makes sense for the government to use its coordination role to direct our collective tax dollars in this direction, then let’s make the investment.
Obviously, such a cold analysis cannot apply to every item in the budget, and there will be legitimate disagreements about future payoffs. Nonetheless, having the decisions about our national investments (a.k.a., government expenditures) based on rigorous and non-partisan analysis will lead to better economic outcomes.

Story by Sally Gilotti

Posted on Tuesday, November 22, 2011

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