Marc Goldwein takes your questions on the federal budget

Feb 14, 2011

The Committee for a Responsible Federal Budget's Marc Goldwein takes your questions about the proposed federal budget, which will be announced Monday, Feb. 14.

Hi everyone, happy budget day and happy valentines day.

Today, the President released his FY2012 Budget, which calls for 1.1 trillion in deficit reduction but does not go nearly far enough in bringing down our debt.

My name is Marc Goldwein, and I'm here to answer your questions on the budget. For the last 9 months, I've served as the Associate Director of the Bowles-Simpson Fiscal Commission -- which made recommendations to reduce the deficit by $4 trillion. Currently, I am Policy Director of the Committee for a Responsible Federal Budget (see our reaction and analysis of the President's Budget here).

Ask away....

Federal taxes have been near the lowest since WWII for nearly a decade. Deficits have increased. Spending cut proposals are largely cosmetic. Is there any possibility of balancing the budget without significant cuts in Medicare and Defense spending and also by increasing taxes?

The Republicans and White House have focussed mainly on non-security discretionary spending, which makes up a whopping 12% of the budget.

These cuts are important, but aren't going to get us there. We need to go after the big programs.

That means Social Security reform, health care reforms, defense cuts, and yes -- new revenue.

But we can raise the revenue without raising rates by going after deductions, credits, and other loopholes.

What would you cut that contributed to the deficit in the past? And I don't meen people who lost their jobs for company sub pay. People will find anyway they can to survive. Not to survive meens a revolution like Egypt down the road.

In recent years, we've passed a number of new spending policies and tax cuts that have added to the deficit unnecesarily.

The Bush Administration was responsible for a number of these -- but President Obama has doubled up.

For example, we established a new Medicare drug program (Medicare Part D) in 2003 when we couldn't afford it. And then instead of scaling it back and making it more of a catestrophic (rather than first dollar) program, we expanded Medicare Part D as part of health reform.

Same with the 2001/2003 tax cuts. They were scheduled to expire in 2010, but at the end of the last year we not only extended them -- but extended parts of the stimulus with it, and added a payroll tax holiday on top.

Did the tax cut agreement that Obama made with the Republicans during the lame-duck Congress make the Deficit Commission's proposals moot?

Moot? Hardly. The fact that the tax cut deal does make the deficit worse by almost $900 billion means we need the deficit commission recommendations even more badly.

Why do both parties seem to be ignoring the recommendations of the 2 chairmen and 11 of 18 members of the deficit commission?

Because deficit reduction is scary. We raised peoples taxes, reduce their benefits, and cut their favorite programs.

But we did get 5 Republicans, 5 Democrats, and 1 Independent to vote for our proposal. Four of them remain sitting Senators (Coburn, Crapo, Durbin, Conrad). And the are working with Senators Warner and Chambliss to actually get something done.

The White House and House Republicans have also taken some small subset of our proposals.

But the truth is: for this to work, we need to hit everything. All programs (and tax breaks) must be on the table, and everyone needs to jump together. That is the only way it will work!

Why doesn't the gov't raise the retirement age for federal employees? (This would not apply to military personnel.) Do the "servants" of the people deserve more than the people? Why does the gov't institute tort reform in the health industry? Obama says the victims deserve the awards. Does the gov't think that people who buy insurance deserve to pay higher rates so that those few "victims" are "properly" compensated?... not to mention that the high rates prevent people from purchasing health insurance.

All good ideas, I think.

We should be getting everyone who is able to retirement later, frankly. That's one of those almost-free lunches. If people work more, they'll pay more taxes, collect fewer government benefits, saving more for their own (shorter) retirements, and help grow the economy.

But the government is sending mixed signals on the retirement age.

Tort reform is also a great idea that can save a good chunk of change. The President has a tiny bit of it in his budget, but not enough.

If the Bush era tax cuts had been allowed to sunset what would the budget deficit have been? If the tax cuts had sunsetted for those making $250,000 what would the deficit have been?

Current law does assume they expire in 2013. Under current law, which also assumes the AMT is not patched and we don't have doc fixes, the deficit will be somewhere between 2% and 3.2% in 2021 -- depending on who you ask (OMB or CBO).

Under the President's budget, the deficit is more the one percent of GDP higher. And that's with his deficit-reducing policies incorporated

Mr. Goldwein: With all of this talk about the deficit, I hear a lot about spending cuts, which is appropriate. But what I don't hear about is raising taxes. With taxes on the richest Americans (who control the majority of American wealth) at it's lowest point in at leat 60 years and two-thirds of corporations not paying any taxes, why are we not hearing about increasing the amount of revenue the country is generating? I know it isn't the (oft-proven wrong) idea of trickle down economics. Is it just politics where no legislator wants to be the first to suggest it, or am I missing something?

Here's a fact that may blow your mind: we can actually reduce tax rates and reduce the deficit at the same time.

And no, not with "supply-side economics" that assumes tax cuts pay for themselves. By getting rid of all the garbage in the code.

In the Fiscal Commission, we showed that getting rid of all the tax expenditures -- credits, deductions, exclusion, etc -- could reduce the deficit by almost $1 trillion over the decade while bring the top rate down from 35% (or 39.6% under current law) to 23%. Even if we kept and refomed a number of tax expenditures, we could bring the top rate down to 28%.

And although we shouldn't count our chickens before they hatch, the truth is that rate reductions like that would likely help promote a real increase in economic growth. And that could come with all sorts of secondary benefits.

Is it time to seriously consider cutting military spending and looking at taking a reduced military role around the world? In my opinion, and Egypt should be the most recent example of this, we spend lots of money propping allies who lose the confidence of their own people who then blame America for keeping their unwanted government in power. We would save money and win more respect around the world if we gave other countries less military weapons and more projects that improved the lives of the people within the country.

Though the Administration does put forward some defense cuts, it actually allows defense spending to growth with inflation.
As Senator Coburn is fond of saying, though, "peace through strength can't be accomplished through a waste of money."
We are buying weapons systems we don't need, offering benefits we can't afford, and frankly not getting the greatest bang for buck (excuse the pun).
The Fiscal Commission cut defense spending by almost 5% in 2013 and showed enough illustrative savings to get us there. The Sustainable Defense Task Force undertook a similar exercise.
We can cut defense, we just need to know where to look. At some point, we'll need to answer the fundamental questions about force structure and about what our military should and shouldn't do. But there is a lot of waste to get rid of before that.

What cuts? Obama's budget only boosts spending. And how would you avoid a major fiscal debt crisis for the U.S?

Well this is a baseline question. Whether the President increases or reduces the deficit depends on where you start. See a blog we wrote on it last year.

Do you believe that when it's all said and done, both parties will agree that entitlement prgms must be cut or scaled back drastically to achieve any meaningful debt reduction in the near future? Isn't the projected deficit/debt understated since the treasury actually "owes" a lot of money to the social security and medicare trust fund? Thanks

Hmmm. I'd like to believe they will.

The truth is, at some point we're going to have to. So we can either fix these programs on our own terms now, or wait until the bond market forces the changes upon us.

I don't want to be an alarmist, but I would also hate to be in a Greece-like situation where the economy is in the gutter and we have to enact very painful and immediate tax increases in spending cuts.

We should instead reform Social Security, Medicare, and other programs now. Phase in the changes gradually. And give people time to prepare and adjust.

There are Members of both parties ready to do this (starting with the Fiscal Commission Senators). We need the White House to lead.

(and yes -- we have a lot of future obligations that are not accounted for in the deficit)

As a former House staffer and current federal attorney, we MUST raise taxes. On the rich, on the corporations, even on some smaller businesses. Our infrastructure around the country is 20th century, in some cases (think dual tracked rail) it's 19th. If we are to invest in the future of this country we have to stop cutting taxes. We can't afford not to.

Yes, we need to raise more revenue. But I don't see how we get enough by just focussing on businesses people making above $250,000 a year. And even if we raise everyone's taxes, it'll only postpone rather than eliminate the need to enacte entitlement reform.

So what? People will end up paying more taxes.

People are going to have to pay more taxes (and receive lower than scheduled benefits).

But the key for work incentives is MARGINAL rates. If you pay $200 in taxes, but only 20% of your last dollar, you'll actually have MORE incentive to work than if you pay only $50 in taxes but 40% of your last dollar.

Have the Feds invest in a toll free telephone number, make that number available to the public/citizens of this great country. Ask them to call in for ways to reduce the Federal Budget. It just may pay for itself. What do you think Marc?

Great idea! They have that for federal employees already. It's called the SAVE awards:

But heck, let's open it up to everyone! I'll offer up a dollar for the best idea.

(or just email me the ideas at


UPDATE: Forgot to mention that we were running a video contest on the deficit, for those interested in getting involved. The winner gets $1000. 

How many times have bipartisan efforts "fixed" Social Security, federal retirement, taxes, and revenue? Too many times, but none have truly addressed the institutional, structural root causes. This budget simply continues to apply new paint on top of old paint. Until we the people and our elected leaders make the hard choices, why should I care about these ephemeral actions?

Fundamental structural reform is best (especially to the tax code!). But I'd take fixing the programs as they are over a debt crisis any day.

There was a recent study showing government employees earn more than their private sector counterparts. With general unemployment being high, wouldn't this be a good time to calibrate the GS Schedule? In other words, the resistance from government employees would be unified - but on the practical side the only option would be to quit and then face unemployment....

Funny you should mention that, we did a great blog on this.

I agree with you, we need to equalize the public and private sectors. Not only because we are spending too much money on employment costs, but also because if Washington is going to ask people to pay higher taxes and get lower benefits, it has to go first.

Washington must lead!

Mr Goldwein, It appears to me that the basic unstated conflict about the deficit regards how progressive our entire tax system (State, Fed, SS, Medicare, sales, etc.) really is. When all are totaled up it has become increasingly regressive, something you seem to be aware of as you slithered out of a previous commentators point about taxes for the wealthy being the lowest in 60 years Is this not the battle... the wealthy want more and the only place it can come from if from the middle class and the poor?

You are right that distribution matter, but I don't think it's that hard to reduce the deficit AND make the budget and tax code more progressive.

The Fiscal Commission recommendations -- which had the support of some very conservative Republicans and some very liberal Democrats -- did just that. We made the Social Security program far more progressive by slowing benefits for high earners and creating a "minimum benefit".

We also made the tax code far more progressive. The bottom quintile gets a small tax cut, while the top 1% pays 8% more of their income.

Most of the discussion around the Federal Budget focuses on deficit reduction. I could not agree more that budget cuts need to happen in order to stop government swelling. Nonetheless, there needs to be a discussion on how to create jobs. Why is it so difficult for Congress and Pres Obama to admit that passing the pending Colombia and Panama FTA would create US jobs? And in turn, help with the budget deficit by putting people to work (paying taxes) and freeing up some unemployment payouts (deficit reduction). Thanks.

I'm always in favor of creating jobs. If we can actually increase economic growth, it will increase revenue and reduce our spending on things like unemployment. Plus it will reduce the "denominator" in our debt-to-GDP ratio.

And we'll all be happier because we'll be richer!

In terms of free trade, I happen to agree with you --- but it's not my area of expertise.

wiki answers reports that the federal government spends 25 billion per year in foreign aid. Is this an accurate number and can or will there be a reduction.

Sounds plausible. We spent $32 billion on total international development and humantarian assistance, and another $8 billion on international security assistance.

Much of that is for foreign aid (depending on how you define it).

Okay, I'll bite: What is "far enough" and how do you (or I) decide?

The Fiscal Commission reduce the deficit by $4 trillion and got the debt down to 65% of GDP -- and some told us that that wasn't far enough.

We need to reduce the deficit enough to reassure our creditors that we are serious about our debt situation.

The President's budget stabilizes the debt at about 77% of GDP -- and frankly they do that with rosy economic assumptions and unspecified savings.

Our target should be to reduce the debt toward 60% of GDP (and eventually below), and to put health and social security spending on a trajectory that we are confident we can finance for at least the next few decades.

Really? Do you want air traffic controllers, intell analysts, Special Agents and security specialsits like myself earning what some fool with a GED does at Wal Mart. Do you have a clue about the make up the Federal work force? Pay someone $20 and see what kind of job they do and the effect it has on this country's security!

To clarify, I'm not suggesting pay for different jobs should be the same.

I'm suggesting that for similar jobs, pay AND benefits should be brought in line.

Some government workers are surely underpaid. But others are not.

Basically every member of the federal work force got an automatic raise the last couple years (though not thsi year), regardless of merit. In this economy, I don't know many businesses that are operating that way.

I earlier asked about cutting the military budget, and I now learn that it has been proposed to be cut. My question now is: do you believe it could be cut more substantially?

Yes --  I believe it could.  See my answer to "Refocusing military and foreign spending" above.

Isnt it true that one of the more lasting budget / tax fixes of the last quarter century was President Reagan's agreement (Ipretty much a back-room deal as I recall) on raising the SS age and adding other such fixes into one nifty package that Congress finally signed on to. Does either Obama or someone (Ryan? Boehner? Ron Paul?!) on the R side have the credibility to undertake such a deal now? Won't it have to wait until 2013 to steer clear of political pressures? thanks

The 1983 Social Security reforms were a great success -- though they did not make the program permanantly sustainable.


We need the same type of agreement today, but way bigger.


We need to roll the 83 Social Security deal, the 86 tax deal (but with more revenue), and the 90 budget agreement all into one.


Probably President Obama should start by looking to the Senate. The four heros (includes the very conservative Tom Coburn and Mike Crapo) who voted for the Fiscal Commission recommendations over there are ready to do something big. So is Saxby Chambliss.


At the same time, nothing passes if it doesn't get through the House. So negotiations will have to take place with Ryan and Boehner.


I'm hopeful that they, and President Obama, will be able to put aside their disagreements for the good of the country.


I just wanted to thank everyone for all their questions today. Hopefully I answered most of them, but if you have one I didn't feel free to email me at


I realize I posted a bad link in my intro, so I'll leave you with the right version of CRFB's initial reactions to the President's budget:


We'll also have further analysis on our blog, The Bottom Line.


And I know the Washington Post will have all sorts of good stuff.


Happy budget day!!

In This Chat
Marc Goldwein
Marc Goldwein is the Policy Director of the Committee for a Responsible Federal Budget as well as a Senior Policy Analyst at the New America Foundation. There, he guides and conducts research on a wide array of topics including tax policy, health care policy, entitlement reform, the economic recovery, Social Security, and the federal budget more generally. He is frequently quoted in a number of major media outlets including The Washington Post, CNN Money, McClatchy Newspapers, and the Associated Press.

In 2010, Marc spent nine months as Associate Director of the National Commission on Fiscal Responsibility and Reform ? more commonly known as the Bowles-Simpson Commission or the Fiscal Commission. He also serves as a senior consultant to the World Bank, and is currently the youngest member of the National Academy of Social Insurance. In the past, Marc conducted research for the Government Accountability Office, the Historian's Office at the Social Security Administration, and the Institute of Governmental Studies at UC Berkeley. Marc holds a B.A. in political science and M.A. in economics from Johns Hopkins University.
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