Everybody wants to reduce the deficit, right? Elected officials across the political spectrum, business and labor groups, even 81% of everyday Americans (according to a poll by the Pew Research Center) — all would like to see the federal deficit reduced. The thing is, it's incredibly difficult to get all these people with disparate interests to agree on exactly how to do it. Everybody wants to cut the deficit, but no one wants to see funding cuts (or ending tax breaks) to their “sacred cows.” So everything (that I like) is amazing and nobody's happy (with that).
This is the problem in Washington right now. In order to raise the debt-ceiling, Congress must reach an agreement on how to cut the deficit long-term. There is no legal requirement tying these two things together, but they have become inextricable in the minds of most politicians and the general public. An overwhelming number of Congressmen have indicated they won't raise raise the country's borrowing limit without seeing commensurate savings, nor will they authorize a short-term raise only to kick the deficit-can down the road again. Even President Obama said in a press conference on Tuesday: “We’ve got a unique opportunity to do something big, to tackle our deficit...I don’t think the American people sent us here to avoid tough problems.” So in order to raise the country's $14.3 trillion debt-ceiling (and avoid defaulting on our loans), Congress must first come to an agreement on a long-term deficit-reduction plan.
The thing is, no one knows how to do that...the agreement part, that is. There's a lot of moving parts here. A consensus must be reached between Congress and the White House, the Senate and the House, and Republicans and Democrats (naturally). There are even arguing factions within each party. Imagine trying to solve a Rubik's Cube...behind your back...with someone else giving you directions...in French...times two.
There are three ways to cut the deficit: reduce spending, raise revenues (taxes), or some combination of the two. Republicans have dug themselves in pretty deep on the “not raising revenues” side of the debate. This is due in no small part to the large number of fiscal budget-hawks elected into Congress last year, as well as the Grover Norquistpledge to not raise any new taxes, which 236 Representatives and 41 Senators have signed. However, there has been some indication that Republicans might be willing to budge on closing tax loopholes. Democrats seem to be more open to making concessions when it comes to spending cuts. The White House even indicated that it would be willing to make cuts to popular entitlement programs like Medicare and Social Security — usually anathema for any Democrat. President Obama has even indicated that he would like see upwards of $4 trillion in savings over the next decade, twice the savings previously expected by political analysts.
President Obama will be meeting with members of Congress from both parties on Thursday in an attempt to break the impasse. And with the August 2 deadline for the debt-ceiling quickly approaching, a deal must be reached quickly. Details of the deficit discussion are still murky and guarded, but here's some ideas that have been floating around (numbers are for the next ten years):
- $500 billion spending cuts in Medicare & Medicaid
- Possible spending cuts in Social Security
- $250-300 billion in cuts in non-health related entitlement program (farm subsidies, retirement benefits for federal workers)
- Around $1trillion in discretionary spending cuts (an undetermined amount to come from defense)
- $40-80 billion in increased revenues from closing tax loopholes for oil companies, hedge fund managers, and private jet owners.
- All of the above are subject to change at this point
The deficit talks are really a moving target right now, so be sure to check back with us here at National Priorities Project as the debate presses on.
*Apologies, Louis C.K.
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