A checklist to see whether debt reduction is real

By Alan Fram

Associated Press

Published: Saturday, Nov. 24 2012 9:00 p.m. MST

Raising money from higher rates, closing loopholes or a combination of the two would create real revenue for the government. The problem is many tax deductions and credits , such as for home mortgages and the value of employer-provided health insurance, are so popular that enacting them into law over objections from the public and lobbyists would be extremely difficult.

With the price tags of tax and spending laws typically measured over a decade, delaying the implementation date can distort the projected impact of a change on people and the government's debt.

Tax cuts written to expire in a certain year can put future lawmakers under political pressure to extend it. That is what Obama and Congress face today with the January expiration of tax cuts, including many enacted a decade ago under President George W. Bush.

Even more questionable are assumptions that overhauling tax laws will boost economic activity and thus produce large new revenues for the government. Many Republicans and ideologically conservative economists contend that's the case, but most economists say there is no sound way to estimate how much revenue can be generated from strengthening the economy by revamping the tax system. Many believe the amount is modest.


A serious agreement should specify how much savings would come from entitlements, meaning those big, costly benefit programs such as Social Security and Medicare. It also should say how much would come from discretionary spending, which covers federal agency budgets for everything from the military and national parks to food safety inspections and weather forecasts.

Why the need for specificity?

Because spending for entitlements occurs automatically, accounts for nearly two-thirds of federal spending and is the fastest growing part of the budget. Discretionary spending has been shackled by past budget deals and, according to the nonpartisan Congressional Budget Office, is moving toward falling below 6 percent the size of the economy by 2022, the lowest level in at least 50 years.

A sincere effort to control expenditures would focus on entitlements, the true source of the government's spending problem. An agreement that envisions deep discretionary cuts risks a reliance on savings that future lawmakers could find unbearable and rescind.

Savings that come from weeding out waste, fraud and abuse, which sounds good but are difficult to find, or rely on one-time sales of federal assets should be treated with suspicion.

Deep cuts that take effect in the future, say after Obama leaves office in 2017, might be better than imposing them now and hurting an already weak economy by reducing spending.

But delayed cuts also open the door for Obama's successors and future Congresses to roll them back. In 1997, Congress voted for cuts in Medicare reimbursements to doctors; those cuts have grown so large that lawmakers now vote annually to restore the money.

Postponing the implementation of spending increases already scheduled to take effect, such as federal health insurance subsidies under Obama's health care overhaul, saves money upfront but makes no permanent changes that would ease future spending pressures.

Another debatable source of deficit reduction would be the hundreds of billions of dollars the Obama administration says the government is saving by winding down wars in Iraq and Afghanistan. While there is no question those expenditures are dropping, the government has run huge deficits while those wars were waged, so there's no money being left unspent as those wars end.

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