The Agenda

Cuts, Cuts, and More Cuts

Like Matt Yglesias, I seriously, seriously doubt that anyone at the Center for American Progress embraces the most aggressive spending reduction proposals in the new “A Thousand Cuts” report by Michael Ettinger and Michael Linden. Ezra Klein has posted an informative interview with Ettinger, and he makes his intentions clear:

The motivation for this report was largely kind of discussed at all of these people who were calling for massive spending cuts but not really willing to own up to what that would mean in terms of the government’s role promoting economic growth and promoting the safety of the American people. So we did this report as a challenge: We figured out a way you could do that, and so if you’re for this, you can own what we proposed or come up with your own, but if you’re promoting that, you have an obligation to be honest with the public about what the consequences are.

Though I don’t agree with every item in the most strenuous CAP proposal, I’m eager to claim ownership of the cuts. The CAP proposals aim to achieve primary balance, or a deficit of 3% of GDP, under the assumption that the president’s budget plan will take effect. So if we want to extend the high-income rate reductions, we need deeper cuts than Ettinger and Linden propose. 

I would recommend making some of the Ettinger and Linden cuts deeper (small items like the Office of Safe and Drug-Free Schools, which I’d eliminate, and bigger items like the conduct of foreign affairs) and I’d restore some of the cuts to regulatory agencies and the District of Columbia, where I’d prefer a longer-term phase-out. I’d also consider revisiting some of the defense cuts in the proposal, but the magnitude of the total cuts strikes me as reasonable. 

To balance any increases, I’d add deep cuts to tax expenditures, many of which Ettinger and Linden outline in the report. In $255 billion proposal that includes tax expenditures, the authors cut them by over $50 billion. Let’s say we make $40 billion in cuts to the tax expenditures Ettinger and Linden identify and use that amount to balance the restored cuts from their proposal that doesn’t tackle tax expenditures. Other tax expenditures I’d cut include the replacement of the mortgage interest deduction with a more progressive home credit, a standard tax deduction for health insurance, and elimination of the state and local tax deduction, a massive subsidy for those of us who live in high-tax jurisdictions. The standard tax deduction for health insurance is markedly incompatible with the president’s budget plan, so note that we’re fiddling with things on a fairly significant scale.

Let’s go even further beyond the president’s budget plan. On Medicaid, I’d press for converting the program into a system of annual block grants to the states. As an interim measure, perhaps states could choose either a block grant with a higher initial funding level and more flexibility or the current system, as President Bush proposed in 2004. But we could also move towards a block grants for all states right off the bat. The end goal would be to either make Medicaid a state program with some federal revenue-sharing or a federal program. As Yuval Levin has suggested to me, and as John Hood argued in National Affairs, the state approach is preferable for a number of reasons, among them that case management tends to work best at the local level. 

And on Medicare, I’d add competitive pricing for all Medicare plans, as proposed by three AEI scholars (Coulam, Feldman, and Dowd) in 2009. The report suggests that this approach could yield savings of up to 8% of total Medicare expenditures, or roughly $50 billion this year. This could serve as the first step towards a true premium support model for Medicare, as proposed by James Capretta.

Take all of this together and we start to make a dent. Actually, we make a pretty big dent. Suffice it to say, I can’t imagine many congressional Republicans would get behind my radical budget-cutting agenda. But I do think this is a credible approach that would improve the cost-effectiveness and quality of public services over time by encouraging organizational discipline.

Later in his post, Matt writes: 

At any rate, I only wish Salam had detailed what some of these cuts are. For example, reductions of 20% in Immigration and Customs Enforcement, and Customs and Border Protection; 8% in federal corrections activities, 5% in the federal judiciary, the FBI, and the Marshall’s Service. We’ve got a 12.5% cut in defense spending, a 75% reduction in agricultural subsidies, and the elimination of the tax deduction for business meals and entertainment. The plan cuts International Security Assistance in half and even trims veterans’ disability payments. Leaving questions of political feasibility aside, I’d actually be interested in how many conservatives think these kind of reductions are good ideas on the merits. My sense of the right-of-center conventional wisdom is that the United States is currently doing far too little in the way of defense spending, immigration crackdowns, counterinsurgency, etc.

Glibly, I think it is possible to do “more with less.” As Mark Kleiman argues in When Brute Force Fails, I think we’re trapped in an equilibrum defined by high crime and high incarceration, yet we have tools, as Graeme Wood observes in his path-breaking article on “prisons without walls,” that can shift us to an equilibrium defined by low crime and low incarceration, an approach that would reduce public spending while also expanding the broader economy. And I also think that many in the national security community understand that the era of the open checkbook is drawing to a close. As for ICE and Customs and Border Enforcement, it’s not clear that the organizational structure of either agency has been designed with cost-effectiveness in mind. 

To be sure, we have far more flexibility on immigration enforcement, etc., when we start rethinking Medicare and Medicaid, but I definitely don’t think the Ettinger and Linden cuts, provocative though they might seem in our profoundly unimaginative political conversation, are remotely close to being beyond the pale. 


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