On Sacrifice and the Federal Debt

One of the more annoying aspects of President Obama’s political rhetoric is his usage of “shared sacrifice” and “fair share.” Now, I understand why he uses those words. They appeal to values that used be more prevalent, and according to at least one professor of psychology it also appeals to our intuitional view of fair distributions. It also appeals to his political base, maybe we can call it chucking “blue meat” every time he tells the rich they need to participate in “shared sacrifice.” Nevertheless, I still find it annoying  because they are buzzwords – not for class warfare or any such nonsense – but for the very reasons I just gave. They’re implicitly narrow words, applicable in the abstract conversation of principles and vision, but inherently misleading as well. Conflicting principles, different ideas, the struggle of ideologies and visions for a national narrative is better argued by the David Brooks’ and Joe Noceras’ of the world. What we need right now is conversation about input and output, a look at what we want and how much we’re willing to pay for it. Of course this can reflect values and principles, but in this context we’re really talking about winners and losers, or better yet who benefits and who doesn’t from various proposals to manage our future spending and debt.

We already have a fairly good idea where the President is coming from: he wants modest tax increases on the rich, reductions in military spending, a call for corporate tax reform that would remove and redefine areas of credits and deductions whole lowering the top rate, an adherence to the spending cuts agreed to in the August debt ceiling deal which will effectively reduce non-defense discretionary spending, including politically popular programs for the President’s base. Within this framework we’ve got a good look at who benefits and doesn’t – pretty much everyone, but no one category is particularly devastated.

Again, the idea is to look at input versus output, or whether the far right of tabled summaries indicate a plus or minus sign. We can’t yet do that with the President’s likely general election opponent, but after last week we can make some broad assumptions about what Mitt Romney would like to do. From his speech:

My administration will also make the hundreds of billions of dollars in cuts necessary to reduce spending to 20 percent of GDP by the end of my first term. I will cap it there. And then, without sacrificing our military superiority, I will balance the budget.

There are three ways I’ll get this done. First, I’ll cut programs. I will look at every government program and ask this question: Is this so critical that it’s worth borrowing money from China to pay for it? 

Of course, we’ll start with the easiest cut of all: Obamacare, a trillion-dollar entitlement we don’t want and can’t afford. It’s bad medicine, bad policy, and when I’m president, the bad news of Obamacare will be over. 

We’ll also cut things like subsidies to Amtrak and funding for Planned Parenthood. We’ll repeal the union giveaway called the Davis-Bacon Act to save taxpayers over $10 billion per year.

Second, we will return federal programs to the states. I will send Medicaid back to the states and cap that program’s rate of growth. And I will do the same for other programs, like food stamps, housing subsidies and job training.

States are better equipped to perform all these functions. Once the economy is really growing again, I believe that we should return spending on these programs to pre-recession levels, cap their rate of growth and give the states flexibility and control. Taxpayers would save money, and those in need would benefit from programs that are more effective, efficient and responsive.

Welfare reform showed us how well a state-led approach can work. Let’s extend that conservative, small-government philosophy across the entire social safety net.

Finally, government itself must be made more efficient. I will shrink the size of the federal workforce by 10 percent and link the pay and benefits of federal employees to those of their peers in the private sector. Public servants should not make more than the Americans who pay their salaries.

So we have an idea on how Mitt Romney wants to address the ‘output’ part of the federal government, which is to say the things he wants to spend less on (I’ll leave alone the absurd idea of “saving” money by repealing the ACA):

1. Amtrak and Planned Parenthood – Small potatoes, really, the “red meat” to hit all the right buttons with conservative voters.

2. The Davis-Bacon Act – I’m not well-versed with this legislation, but I doubt repealing it would really save 10 billion – this bases federal contracts on prevailing local union wages instead of non-union wages. Suffice it say, some private contractors that do work for the federal government would take a pay cut.

3. The Federal workforce – Reducing the size of the federal workforce is a hefty chunk of jobs, though I’m not sure he means to accomplish this by attrition, direct layoffs or a combination of the both. As of now, 10 percent of the federal workforce (excluding Postal workers) is around 200,000 jobs.

4. Block granting Medicaid and implementing spending caps – This is the big money saver, because most states will spend less on Medicaid if they had the choice and a spending cap is a spending cut, period. It means that the program will no longer respond to how many people need it. There would be a certain amount of money, and if there are more people in need than the spending cap then tough luck.

But whose tough luck would it be, and how hard is it going to be for Mitt Romney to cut Medicaid? Luckily Aaron Carroll did the legwork on this one:

“The biggest share of the pie, or the greatest percentage of Medicaid money, is spent on the blind and disabled. It’s going to be difficult, if not impossible, to cut care from that group. The next largest share of Medicaid goes to the elderly. Yes, even after they get Medicare, the very poor among those age 65 or older also get Medicaid. We call them dual-eligibles. Does anyone think that we’re going to cut from seniors after the 2010 elections? Unlikely. Should we cut from kids in foster care? Or perhaps “BCCA Women”, or women who are getting breast or cervical cancer assistance. No?

That pretty much leaves children or adults. Let’s own that it’s more difficult, politically, to cut spending on children (although it is possible). So it’s probably going to fall on adults.

There are two problems with that. The first is that Medicaid is already pretty crappy for non-elderly adults. If you don’t have kids, then in the majority of states in the US, it does not matter how poor you are, you can’t qualify for Medicaid. Even when you can, it’s pretty hard. And lots of adults on Medicaid are pregnant women. Should we cut from them?”

Dr. Carroll calls Medicaid “the ultimate safety-net.” It’s really only for people who absolutely need healthcare and can’t afford it. There’s no demographic in here that wouldn’t be tough to politically swallow saying “No, you can’t go see a doctor.” Yet Romney rhetorically casts himself as someone who would make tough choices in the face of mounting debt and too little revenue. In this regard he might call for sacrifice in output – even in the form of goods and services for the blind, elderly, disabled, pregnant, low-income kids and adults, federal workers, Amtrak workers and riders, private federal contractors, and several others.

So why does he propose all these strategies to save money in Medicaid output but still end up with this picture?

Which is to say, how do we save all that money in block granting and capping low-income aid and healthcare for the poor but still increase federal deficits to the tune of 250 billion dollars by 2021 – representing a 12 percent increase in the debt to GDP ratio?

Because he wants to do this:

This is based off of Romney’s newest proposal to cut individual tax rates by 20 percent, as scored by the Tax Policy Center. You can’t see it because it’s too small, but the lowest to middle quintiles still get a tax cut.

Essentially Mitt Romney wants a massive tax cut (on top of the permanent extension of the Bush era ones) for the wealthiest Americans. He then wants to finance it primarily by cutting Medicaid, but also by reducing spending on the Supplemental Nutritional Assistance Program (food stamps), Temporary Assistance for Needy Families, housing subsidies, and to a lesser extent through layoffs and attrition of the federal workforce. Furthermore, when it’s all said and done, it makes the federal debt worse.

I don’t think it’s worth it.

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3 responses to “On Sacrifice and the Federal Debt

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