Thursday, January 20, 2011

Leonhardt: The Deficit We Want

by Calculated Risk on 1/20/2011 09:10:00 PM

David Leonhardt reviews some choices on reducing the deficit at Economix: The Deficit We Want

Here is the story on the polls Leonhardt discusses: Poll Finds Wariness About Cutting Entitlements

In some ways, this is a common story. When people are asked to choose between cutting spending or raising taxes, they want to cut spending.

Not surprisingly, when given a straight-up choice between broad spending cuts and tax increases, Americans say they would prefer to reduce the deficit mostly through less spending. It’s not even close: 62 percent for spending cuts, 29 percent for tax increases.
But there is overwhelming support for individual programs:
A few questions later, though, our pollsters offered a different choice. Would people rather eliminate Medicare’s shortfall through reduced Medicare benefits or higher taxes?

The percentages then switch, becoming nearly a mirror image of what they had been. Some 64 percent of respondents preferred tax increases, while 24 percent chose Medicare cuts. The same is true of Social Security: 63 percent for higher taxes, 25 percent for reduced benefits.

Herein lies the political problem. We want to cut spending. We just don’t want to cut the benefits that the spending pays for.
This is a huge disconnect.

Note: Medicare is a huge problem, as is the current General Fund structural deficit that requires either tax increases or probably cuts in defense spending. As Leonhardt notes, Social Security is a minor problem in comparison.