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Saturday, July 29, 2006

How Would You Solve the Deficit Problem?

This is an exercise by a group of "ordinary" people to see what measures they would take to cut the deficit. They are surprisingly open to tax increases. In an attempt to find lessons for both political parties, the result that tax-increases are widely endorsed by the group is mentioned along with the observation that the group was open to change in Social Security and Medicare programs, but I read the support for tax increases as much stronger than the support for big changes in social programs:

Public’s Deficit Fix May Stun Politicians, by Edmund L. Andrews, Economic View, NY Times: ...Could three dozen ordinary American adults who had never met before — a group that included fresh college graduates, retired schoolteachers and a self-employed business owner — reach agreement on how to prevent a fiscal train wreck? Could they do any better than their elected leaders in Washington, and were they willing to make any sacrifices? ...

The effort, conducted two weeks ago, was sponsored by ... the Brookings Institution, home to many centrist Democrats; the Heritage Foundation, a conservative stronghold...; and the Concord Coalition, a bipartisan group that advocates fiscal discipline but is essentially neutral on whether it should come from higher taxes or lower spending...

The researchers are still analyzing the results, to be published later this summer. But the session in Philadelphia left some strong impressions on a reporter permitted to observe it. Among them:

• The participants didn’t hate taxes nearly as much as many Republicans think.

• They seemed to treasure Social Security and Medicare in their current forms, but were more open to change than many Democrats think.

• None of the participants pushed for less defense spending, even if the war in Iraq were to wind down.

• Nobody could agree on a single government program that ought to be cut or eliminated altogether.

The good news was that people here appeared less polarized and more open to sharing burdens than do their elected leaders in Washington. The bad news was that the ... group thought the best solutions were to tax other people (smokers, drinkers, S.U.V. buyers, the rich) or to somehow “spend smarter.”

In that sense, participants were much like their elected representatives. The difference was that people were willing to contemplate higher taxes or other measures considered taboo in one party or the other.

Virtually no one needed to be persuaded that the federal budget is on an unsustainable path. ... Participants were given four strategies for tackling the problem. The first was do nothing, but wait and hope that economic growth eliminated the need for big changes.

The second approach put a priority on “keeping our promises to the elderly” while raising taxes and cutting spending in other areas.

The third was to “increase personal responsibility and choice,” shifting Medicare and Social Security from government financing to individual investment-type accounts.

The last strategy was to “invest in the future,” putting more money into education and economic development, but raising taxes and trimming old-age programs. ...

[N]o one endorsed “wait and hope,” the de facto strategy in Washington. More surprising, virtually all the participants agreed on the need for higher taxes. Many supported a repeal of Mr. Bush’s tax cuts of 2001.

That contrasted sharply with the adamant opposition to tax increases among Republican leaders, especially President Bush. But the openness to at least talking about higher taxes appeared unanimous among those in the Philadelphia group, including those who described themselves as supporters of Mr. Bush.

“I was surprised that so many people were in favor of higher taxes, but I think it’s a good thing,” said Anthony Condo, a construction contractor in his 50’s and a strong Bush supporter. “If taxes went up to lower the deficit, and I knew they were being used for that, I would be in favor of it.”

This isn’t to say that tax increases amount to a winning election issue. “Focus groups and polls create a kind of laboratory with conditions that don’t always exist in the real world,” said Geoffrey D. Garin, president of ... a polling company that does work for many Democratic candidates (and was not involved in the ... exercise). ...

When the subject shifted to reducing government spending, the group seemed less successful. Few if any people thought military spending was too high — even if the United States withdrew from Iraq. Nor was there agreement on other programs to cut. Most wanted more money for education, and many wanted more money for prescription drugs. Budget cuts, such as they were, involved “smarter” spending and a crackdown on waste, fraud and abuse...

Still, people seemed willing to accept change. Despite intense support for Social Security, for example, many said that workers should be encouraged to postpone retirement. And despite support for Medicare, there was approval for reducing “heroic” high-technology measures that might keep very old and very ill people alive for a few weeks or months.

So if there was a message, it was not that people wanted to dodge tough choices. It was that they wanted good ideas from their leaders.

Quick note: I have been resistant to the idea of raising the retirement age, more so than most, because I wanted to be convinced that the health of older workers had increased enough to justify such a change. This gives me reason to reconsider, but only as part of a more comprehensive (and reality-based) reform plan.

    Posted by on Saturday, July 29, 2006 at 08:10 PM in Budget Deficit, Economics, Politics, Social Security, Taxes | Permalink  TrackBack (0)  Comments (17)

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