When it comes to budget negotiations, many interest groups demand that certain items be considered “off the table” and exempt from any changes. The reality, however, is that everything needs to be on the table for both economic and political reasons.
When it comes to budget negotiations, many interest groups demand that certain items be considered “off the table” and exempt from any changes. The reality, however, is that everything needs to be on the table for both economic and political reasons.
Two of the most common demands are that deficit-reducing legislation be enacted without raising taxes or touching entitlement programs such as Social Security, Medicare and Medicaid.
It would be virtually impossible for a sustainable budget to meet these two demands; the Congressional Budget Office projects that nearly every dollar of incoming revenue will be needed for mandatory spending programs by the end of the decade.
This would require a budget deal to steeply cut or eliminate all non-mandatory spending programs, including federal transportation funding, investments in scientific research, and national defense – an untenable prospect.
Even adhering to just one of these two demands on taxes and entitlements would be difficult. To stabilize the national debt at its current level relative to the economy without raising taxes, all spending would need to be immediately cut across the board by 9 percent.
To stabilize the debt solely through tax increases would require raising everyone’s taxes by 10 percent with no time to phase this in. And if tax increases were limited to just the wealthiest 1 percent of taxpayers (another common proposal), their tax burden would need to increase by one-third beginning this year.
Beyond the mathematical realities, there are also political reasons why everything needs to be on the table in budget negotiations. It is more difficult to ask people for shared sacrifices when certain groups are exempted.
For example, in 2013 Rep. Paul Ryan (R-Wis.) and Sen. Patty Murray (D-Wash.) struck a limited 2-year fiscal deal on funding levels for the government that included reforms to military retirement benefits.
However, these changes (supported by the Pentagon) were reversed just a few months later when some retired service members objected to being singled out in the legislation. Had everyone been contributing something to deficit reduction, it would have been much less likely that any individual interest group could have retroactively exempted itself.
To be economically and politically sustainable, a good budget deal has to be the result of negotiations in which everything is on the table. Going forward, policymakers should keep this and our previous 24 lessons in mind as they weigh changes to our already unsustainable fiscal trajectory.
