With budget talks ongoing, CBO releases 103 ways to cut the deficit
There’s no shortage of measures to argue over when it comes to determining spending levels. The Congressional Budget Office on Wednesday released a report of 103 policy options that would either decrease federal spending or increase revenues from 2014 to 2023.
With the January deadline to keep the government funded fast approaching, the 29-member budget conference committee, led by House Budget Committee Chair Paul Ryan, R-Wis., and Senate Budget Committee Chair Patty Murray, D-Wash., convened their second meeting Wednesday. They’re tasked with devising a spending plan by Dec. 15. The policy options vetted by the CBO are not targeted directly to the budget conference committee, but some of these options have been introduced in current legislative proposals. Others come from previous administrations’ budget proposals and some are adopted from the private sector.
Here’s a sampling of the policies and how much each would save or generate for the U.S. government.
Ways to Cut Mandatory Spending (spending mandated by law)
Restricting federal subsidized loans to students who are eligible for Pell Grants (in other words, who demonstrate financial need) would reduce by nearly half the number of students eligible for those subsidized loans, saving the government $18 billion from 2014 to 2023. (See page 21 of the report.)
Eliminating direct payments to agricultural producers in 2015 would save the government $25 billion on farm spending between then and 2023. (See page 18.)
Only about 10 percent of households participating in the Supplemental Nutrition Assistance Program, or SNAP, qualify through income level tests. (The rest automatically qualify for SNAP through their enrollment in other government assistance programs). If these same income tests were applied to the other 90 percent, the government would save $10 billion from 2015 to 2023. (See page 30.)
- As our Social Security columnist Larry Kotlikoff, and others on the Business Desk, frequently write, Americans are likely to live (and work) much longer than in the past, and they’ll need more money to make it through retirement. He often advises waiting to collect Social Security benefits as long as possible up until age 70 when they start at a higher value. Full retirement age (the age at which you can file for benefits without being penalized for taking them early) is 66 for most boomers (those born between 1944 and 1954) retiring now, but accelerating the retirement age to 67 and beyond in two-month increments over six years would save the feds $58 billion. (See page 40.)
Ways to Cut Discretionary Spending (spending authorized by appropriations acts)
Reducing the number of major combat units in the military would cut $552 billion until 2023. (See page 56.)
Eliminating subsidies for AMTRAK would save $15 billion from 2015 to 2013. (See page 83.)
- Slimming down the federal (civilian) workforce by 10 percent at certain agencies (with many agencies exempt) would reduce related discretionary spending by $43 billion. (See page 92).
Ways to Raise Revenues
Ryan has argued, and Murray has agreed, that the conference committee is not the place to hash out a new tax structure; that’s the prerogative of the finance committees. But the CBO’s report shows that raising the statutory tax rates on all ordinary incomes by 1 percentage point would generate $694 billion from 2014 to 2023. (See page 106.)
Raising the rate of long-term capital gains taxes (on the sale of corporate stocks and other assets) by 2 percent (meaning a 22 percent rate for those in the top tax bracket) would yield $53 billion by 2023. (See page 111.)
Many corporations that are supposed to pay the highest 35 percent tax on their incomes don’t actually pay that much because of deductions and loopholes. But increasing all corporate tax rates by 1 percentage point would generate $113 billion. (See page 152).
If the federal excise tax on gasoline were raised by 35 cents (to 53.4 cents per gallon) and then indexed for inflation going forward, revenues would increase by $452 billion over 10 years. (See page 168.)
Excise tax rates on alcohol haven’t been raised since 1991. Raising the tax to $16 per proof gallon would increase revenues by $64 billion. (See page 170.)
- Adding a tax where there is none — on financial transactions — which includes the buying of securities and trading of derivatives, would generate $180 billion from 2015 to 2023. (See page 172). Mark Rosenman recently made the case for the financial transaction tax, commonly called the “Tobin Tax” after economist James Tobin, on the Making Sen$e Business Desk.
Also on Wednesday, the Treasury Department announced that the budget deficit declined in the first month of fiscal year 2014, down 24 percent from October of last year. The budget deficit declined by 38 percent in FY 2013.