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On Eve of State of the Union, Battles Loom Over Federal Spending Cuts

January 24, 2011 at 4:27 PM EDT
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Congressional correspondent Kwame Holman reports on debate in the House over steep spending cuts proposed by Republicans, and Jeffrey Brown looks at the fight over how to handle the nation's growing debt with Robert Greenstein of the Center on Budget and Policy Priorities and Chris Edwards of the Cato Institute.
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GWEN IFILL: Budget battles are heating up on Capitol Hill. The House of Representatives today began debating severe spending cuts proposed by the Republican majority.

NewsHour congressional correspondent Kwame Holman has our story.

KWAME HOLMAN: By putting the issue of spending front and center, House Republicans were sending a clear message on the eve of the president’s State of the Union address. Their effort today was to instruct the Budget Committee to reduce nonsecurity spending to pre-2008 levels, which would save $84 billion.

California’s David Dreier:

REP. DAVID DREIER (R-Calif.): Time for us to exercise our power of the purse. Restraint is long, long overdue. We must return to prebailout, prebinge-spending levels for funding the federal government. We know that a great deal of hard work and tough decisions lie ahead for every single member of this institution.

KWAME HOLMAN: Programs that could be particularly hard-hit include Amtrak passenger rail, the National Endowment for the Arts and the Corporation for Public Broadcasting.

Even with those cuts, the federal budget deficit is expected to top $1 trillion this year. Democrats, meanwhile, argued broad cuts would have serious consequences.

Oregon’s Peter DeFazio:

REP. PETER DEFAZIO (D-Ore.): If we were only going to get to a balanced budget this year with cuts, that would mean eliminating the entire government of the United States of America. We’d still make our Social Security payments, and we wouldn’t be able to exempt the Pentagon, which they want to do, if we wanted to really get to $1.6 trillion.

No more border — you know, Border Patrol, no more Homeland Security, no more Coast Guard, no more Postal Service, no more Centers for Disease Control. The Department of Education, gone. They wouldn’t care much about that. Park Service, I guess we’d probably sell off the parks to the highest bidder. I don’t know.

KWAME HOLMAN: Federal spending also dominated the conversation on the Sunday political talk shows.

Senate Republican Leader Mitch McConnell urged the president to focus on cutting the size of government, not growing it.

SEN. MITCH MCCONNELL (R-Ky.), minority leader: I think excessive government spending, running up debt, making us look like a Western European country, is the wrong direction. That’s the direction they took the first two years. The American public, as one pundit put it, issued a massive restraining order. And I don’t think we’re going to go in that direction any longer.

KWAME HOLMAN: But not all Republicans appear to be on the same page with what to cut. House Majority Leader Eric Cantor said everything was on the table, including defense spending. That put him at odds with a group of GOP lawmakers who said last week such cuts should be off-limits.

REP. ERIC CANTOR (R-Va.), House Majority Leader: But I can tell you we’ve always said this too. Every dollar should be on the table. And I have said before…

DAVID GREGORY, moderator, Meet The Press: Including defense spending?

REP. ERIC CANTOR: I have — absolutely.

DAVID GREGORY: OK.

REP. ERIC CANTOR: I have said before, no one can defend the expenditure of every dollar and cent over at the Pentagon.

KWAME HOLMAN: For his part, the president was short on specifics this weekend. In a videotaped message e-mailed to supporters previewing tomorrow night’s speech, he stuck to broad themes, such as competitiveness, job creation and responsible deficit reduction.

U.S. PRESIDENT BARACK OBAMA: My principal focus, my number-one focus is going to be making sure that we are competitive, that we are growing, and we are creating jobs, not just now, but well into the future. I’m focused on making sure that the economy is working for everybody, for the entire American family.

We’re also going to have to deal with our deficits and our debt in a responsible way. And we have got to reform government so that it’s leaner and smarter for the 21st century.

KWAME HOLMAN: At the White House today, Press Secretary Robert Gibbs told reporters they wouldn’t be getting any more from him.

WHITE HOUSE PRESS SECRETARY ROBERT GIBBS: We’re not going to have a debate in Washington about whether we need to make some changes and whether we need to control our spending. We’re going to have, hopefully, a bipartisan discussion and work together on how we go about doing that.

KWAME HOLMAN: That discussion will begin in earnest in mid-February, when the president unveils his budget for the coming fiscal year.

GWEN IFILL: Jeffrey Brown has more on the big decisions to come on spending and cutting.

JEFFREY BROWN: And for that, we turn to Robert Greenstein, executive director of the Center on Budget and Policy Priorities, a policy organization that advocates on behalf of lower-income families. And Chris Edwards is director of tax-policy studies at the Cato Institute, which is dedicated to free markets and limited government.

Welcome to both of you.

CHRIS EDWARDS, director of tax-policy studies, Cato Institute: Thank you.

JEFFREY BROWN: Chris Edwards, we don’t have specifics yet, do we? So, as a starting point, how hard or easy would it be to do what the Republicans are talking about this year?

CHRIS EDWARDS: Well, the Republicans are off to a good start.

They have promised to reduce spending on domestic programs back to 2008 levels. What that means is this: Spending on these domestic programs has roughly doubled since 2000 from about $280 billion a decade ago to about $550 billion today. The Republicans want to take about $100 billion out of that. That seems like a good start to me. I wish they would include defense cuts, and they have also got to tackle entitlements.

JEFFREY BROWN: But how — how hard or easy? Same question to you.

ROBERT GREENSTEIN, executive director, Center on Budget and Policy Priorities: Very hard. We’re talking about $100 billion that doesn’t include any changes in the Pentagon.

It rules out any of the spending or the subsidies that are in the tax code through special-interest tax loopholes. The $100 billion would have to come entirely from things like elementary and secondary education, aid to help college students afford college, protecting food safety, air traffic control, all of these sorts of things, law enforcement, protecting the borders.

And to get $100 billion now, when a number of the months of the fiscal year are already gone, it would mean all those things get cut by a third overnight. You’re cutting the cancer research by a third, services for disabled, frail elderly by a third.

Now, if you didn’t want to cut some things by a third, fine. Then you would have to cut other things by two-thirds. These would be the most severe cuts in these kinds of programs in American history. And by coming right now, while the economy is really weak — yes, we need spending restraint when the economy recovers. You do it right now, you will lose hundreds of thousands of jobs.

Because you’re pulling out money from the economy…

JEFFREY BROWN: All right.

ROBERT GREENSTEIN: … you will have less sales in the private sector.

JEFFREY BROWN: All right, let’s come back to that — that bigger question about the economy and the timing here. But when you listen to that list, what is your reaction? That that — that’s a good list, or that…

CHRIS EDWARDS: I think just about all those cuts would be good. And I would — I would add in farm subsidies, $25 billion a year. This is sort of — we tax average people to fund rich farm corporations. Energy subsidies, again, these are business subsidies that go to big corporations.

The federal government does all this stuff funding local governments, like $10 billion a year on public housing and urban transit, this sort of stuff. That’s not — that stuff isn’t really a federal responsibility. So, I would say, get the government out of business subsidies, get the government out of funding properly in local activities.

JEFFREY BROWN: And the consequences — and the consequences of doing — of making such big cuts in such a quick amount of time, short amount of time?

CHRIS EDWARDS: I think we’d have a better government here in the United States. I think running these trillion-dollar deficits is extremely damaging to the economy. It’s really unsettling in financial markets.

All these basic investments, like air traffic control, we can do in the private sector. I mean, Canada has a private air traffic control system. So, I don’t — you know, cutting air traffic control would be a good thing, in my view.

JEFFREY BROWN: Mr. Greenstein.

ROBERT GREENSTEIN: You know, I agree with Chris that it would be good to rein in farm subsidies and business subsidies.

Under the Republican proposals, you’re not allowed to get any of the $100 billion in cuts from either of those areas. Farm subsidies are an entitlement, separate part of the budget. Most of the business subsidies are coming through tax breaks in the tax code, separate part of the budget.

So, we’re talking about really very large cuts overnight. And we should keep in mind that the part of the budget they want to take $100 billion out of, one-third of that part of the budget is federal grants to state and local governments. They already have huge budget holes.

JEFFREY BROWN: So, it would fall on them, you’re saying?

ROBERT GREENSTEIN: It would fall on them. They would fire even more teachers. They would cut back fire and police even more at the local level.

JEFFREY BROWN: All right, what about that specific point? Would it be thrown on to the states and local governments that don’t have any money?

CHRIS EDWARDS: I think the federal government should cut all these state and local activities. Then it would up to each state how big they want to fund these programs. So, the federal government spends $60 billion on K-12 education.

In my view, federal involvement in the schools has not helped test scores. It hasn’t helped American students. And, again, let’s look at a foreign example. Canada has no federal department of education, and yet their kids do much better on international tests than do American kids.

So, I don’t think federal involvement in these local activities is the answer.

JEFFREY BROWN: Do you think — we’re making a — you know, it’s partly economics and partly politics here, of course, inescapably, right?

CHRIS EDWARDS: Right.

JEFFREY BROWN: When you get to the — all this list that we have been talking — you have both been talking about, what happens politically? Isn’t that always somebody’s sacred cow or somebody — some representative represents these…

CHRIS EDWARDS: You’re absolutely right. Every single federal spending program has special-interest group that supports it. And there is some heavy lifting involved in spending cuts.

I wish the Republicans would come out and give us more specifics. So far, as we have seen, Republican leaders have been very shy about telling us exactly where they would want to cut. And we don’t know whether they are going to be cutting across the board or cutting these specific programs.

Certainly, I think we need to get the federal government out of areas like K-12 education. The federal government simply doesn’t have the money anymore to fund these local activities. And that’s the message the Republicans should be giving here.

JEFFREY BROWN: But, you think, Bob Greenstein, it’s no accident that we haven’t heard specific yet from either side?

ROBERT GREENSTEIN: It’s no accident, because once — it’s — it’s a campaign pledge, cut spending with a capital S. There is no spending with a capital S that’s a program.

There are things like education and child care and protecting the borders. And they’re afraid to actually put the specifics on the table. In terms of Chris’ point about state and local governments, they’re flat on their back now because of the downturn.

What are they going to do, double tax rates to make up with — for — for a withdrawal of federal funding from education? I mean, this is really not something that would work.

CHRIS EDWARDS: But, I mean, the federal government doesn’t have any magic source of funds. The funds for federal programs eventually come from the taxpayers who live in the 50 states. So, there’s no magical source of funds here. We have got — the taxpayers have to pay for all of the spending.

ROBERT GREENSTEIN: There’s something surreal about our having just extended a tax cut that provides an average tax cut of $125,000 a year to each person who makes over a million a year. Somehow, we could afford massive tax cuts for the wealthiest people in the country, but we have to slash K-12 education, air traffic control, clean air and water, cancer research?

JEFFREY BROWN: Let me come back to one other larger — the issue you raised at the beginning, the larger issue, that this is the exact wrong time to be making cuts of — of this sort, whether we need to down the line or not, right? But, in a lousy economy, the argument is, we need to be spending more, not — not cutting less…

CHRIS EDWARDS: I think that’s…

JEFFREY BROWN: … not cutting less.

CHRIS EDWARDS: I think that’s backwards Keynesian economics.

We have had deficit spending of a trillion dollars a year the last three years. And look at where it’s got us. We still have got almost 10 percent unemployment. So, I don’t think the idea of big government spending has solved our economic problems.

I think, like Britain now, we need to have a spending-cut package put in place. We need to start reducing these deficits. We need to get the federal government out of the private sector, so that the private sector can start growing again.

The government won’t make the economy grow again. Ultimately, it’s got to be private businesspeople feeling comfortable with the economic picture to start investing again.

JEFFREY BROWN: All right, and a brief last word to you?

ROBERT GREENSTEIN: Well, I think the key economic studies show, if we hadn’t done what we have done in the last two years, unemployment would probably be about 12 percent or 13 percent now.

And if you want to make an analogy with Great Britain, even after all the cuts they’re doing, they will have government at 40 percent of their gross domestic product. They have a much bigger public sector than we do. And even after they do all their cuts, they will have a bigger public sector than we do before we make any cuts.

So, the analogy doesn’t really work, Chris.

JEFFREY BROWN: All right, the beginning of a big, big argument here in Washington.

Bob Greenstein, Chris Edwards, thank you both very much.

CHRIS EDWARDS: Thank you.

ROBERT GREENSTEIN: Thank you.