Are Boehner's spending cuts realistic?

May 10, 2011

Speaker Boehner proposed spending cuts of more than $2 trillion without raising taxes Monday in an address to the Economic Club of New York. Is this realistic? Center for Economic Development's President Charles Kolb, who attended the Speaker's speech, chatted with readers at noon.

Hi everyone! I was fortunate to be in New York last night.  I met the Speaker and heard his speech to the Economic Club on New York.  I would love to hear your thoughts on the Speaker's proposals.

He was definitive in ruling out tax hikes, but I think there's significant room to negotiate between the two parties and the White House to cut a deal here.

How can Speaker Boehner demand cuts without be willing to budge on tax increases? Is this just a negotiating ploy on his side, andif so, isn't he setting himself up for a "Read my lips" moment if the final agreement does include tax increases?

Excellent question.  I worked for the President who did the "read my lips" routine and we all know what happened.  But the Speaker ruled out tax "hikes."  He didn't say anything, however, about tax "reform," and that's where I think one could cut a deal here.  He wants to reduce the structural deficit with real spending cuts and to promote economic growth.  President Obama wants job creation.  One thing that could be on the table is major structural reform of our tax code, which both reduces growth and reduces job creation.

I attend a school where there is a strong connection between DARPA and the university. Just a cursory look indicates the cost are well into the millions. In this context, are members of Congress able to obtain data which reports each Federal-University program and the resultant cost to the taxpayer? Would it be productive for both political parties to legislate a limit the dollar amount each university can receive?

First, our investments in DARPA help create the internet that all of us enjoy today.  That has been a big win for the country and the world.  Federal spending goes to universities in several ways -- grants, contracts, Pell grants and other forms student financial assistance.  Most of this spending can be found in the federal budget, but I do not know the details about tracking all federal dollars to individual universities.  Having said that, unless the federal spending relates to classified security work, I see no reason why the universities should not be willing to disclose all of this funding.

Boehner wasn't talking to the tea party. How was his speech received?

The audience was sober, polite, and respectful.  I do not recall that he got any applause for specific proposals, but during the question and answer period, the audience did enjoy (and laughed) during his exchange with billionaire Pete Peterson about Mr. Peterson paying for his own Medicare costs.  Mr. Peterson appeared to enjoy the exchange very much as well.

Were jobs or unemployment mentioned within his speech?

The issue of jobs came up I believe within the context of economonic growth, and the Speaker, as he has at other events,  stressed his own "humble" orgins.  So he did give the impression of being on the side of working men and women in wanting to promote job creation through several strategies that would boost growth.  He clearly wants to see the country turning around the current unemployment numbers.

If Mr. Boehner wants to cut $2 trillion, shouldn't he tell us pretty specifically what he thinks should be cut as a way of starting the -- to put it nicely -- discussion? If he wants to gore a lot of oxen, he better be willing to include an ox or two of his own in there, and he better be willing to be serious about major cuts in defense spending. Increasing revenues absolutely must be part of the equation, too, even if it's not through tax "hikes."

Absolutely.  I think that members of both parties should take a real hard look at the federal spending and sort out those programs that have been around for a long time and which may not be working.  The problem is that we keep adding and layering programs on top of programs in a way that most businesses would never pursue. 

Take a look at GE, for example, which has transformed itself during the last decade under Jeff Immelt so that it is a fundamentally operation than it was under Jack Welch.  Efforts like this rarely happen in government and they should.  Former Vice President Al Gore once tried to something like this and the effort needs to be revived. 

Doesn't restructuring the tax code imply raising taxes on some and reducing them on others. if raising taxes is ok, why isn't it just ok? In any case, what is the evidence that restructuring leads to job creation and growth?

First of all, our tax code is extremely inefficient in doing the one thing that it's supposed to do well: namely, raise revenue.  It is overly complex, overly long, and inpentrible to the average citizen.  In 1986, we had significant tax reform, which eliminated a lot of the loopholes and complexity, lowered the rates and broadened the based.  That's what I have in mind when I talk about structural reform of the tax code.  I think one can do this while also maintaining revenue for the federal government, but this type of simplification will, in my view, promote growth and jobs.  Yes, some may be paying more, others might be paying less, but the tax cod that we have now is not serving the interests of anyone in this country expect those special interests who lobby and make politcal contributes to get their special deal.  Most Americans can't do that and I think most object to the way the system works now. 

I work in a financial office for a government agency and have learned the true impact of certain actions by Congress. For example, program offices sometimes attempt to spend all their money, so Congress does not think the money is not needed and cut the program the next year, when the office actually does need the money. (They only spent 80% of their funds, cutting that by is an easy savings) In a corporation, executives would be rewarded for saving money. In the federal government; they are punished with fewer resources. What might Congress do, to reward agencies that return money, rather than punish them for saving?

Thanks for raising this question.  I have worked in government and know exactly what you're talking about.  What you say is a perfect example of how government can benefit by having more insentives applied to its activities.  As you point out, the existing incentive is to spend all the money that's been appropriated because at the end of the fiscal year the agency will be audited and managers are rewarded for getting the money out the door on time, so that it doesn't lapse.  There are no incentives to help ensure that the money is spent well, has the intended consequence or, in some instances, isn't spent at all when it is not needed, might be wasteful, or not produce the expected consequences.  The Congress should consider your point as should the GAO.  We spend billions of dollars on government programs and we don't often step back and ask if those programs are really working to benefit the people whom they are intended to benefit. 

What is Speaker Boehner's thoughts on military spending? Are Republicans willing to consider cutting this previous "sacred cow"?

I hope that military spending will be treated like every other dollar should be treated in the federal budget.  In other words, the money should be spent on activities that we need and that are priorities for our nation's defense and national security.  We have already seen examples where the defense department has been under pressure to continue spending on weapons and equipment that it doesn't want and doesn't need.  In some instances the pressure comes from members of Congress who want the spending the continue in their district or lobbyists whose clients benefit from the spending.  I would hope that both Democrats and Republicans would work together to make sure that our defense budget reflects what we truly need rather than rent-seeking that results from some lobbyist or other pressure. 

Is requiring Federal employees to pay half their pension still on the table as a cost saving measure? If so, is this for only new Feds or all Feds?

I have no idea.  You might want to ask the Office of Personnel Management on that.

How strong is his caucus behind Speaker Boehner? If he sticks to his position without wavering, are there enough Republicans who potentially may accept compromise and thus undermine the Speaker's position?

Politics inherently involves the art of compromise.  Most political leaders always look to shore up their base.  I'm sure Speaker Boehner is no different than any other major political leader.  The Republican caucus in the House has added new members from the Tea Party, and I still think it's too soon to know exactly where that group is going to go.  My sense is that other leaders such as Eric Cantor and Paul Ryan want this Speaker to succeed, and also want to make substantive progress in attacking the structural deficit. 

Democrats, by the way, face similar challenges as President Obama attracts criticism from both the left and right wings of his own party.

Welcome to Washington.

This has really been a pleasure, but unforunatey I need to leave for a meeting in New York.

I'd be pleased to take any other questions via my email at 

In This Chat
Charles Kolb
Charles Kolb is the Committee for Economic Development President. Prior to joining CED in 1997, Kolb served as General Counsel of United Way of America from l992. During nearly ten years of government service, he held several senior-level positions. He served as Deputy Assistant to the President for Domestic Policy at the White House (1990-1992) where he worked on several domestic policy issues involving economic, education, legal, and regulatory matters. From 1983 to 1990, he held three other government positions: Assistant General Counsel, Office of Management and Budget (1983-1986); Deputy General Counsel for Regulations and Legislation, U.S. Department of Education (1986-1988); and Deputy Under Secretary for Planning, Budget and Evaluation, U.S. Department of Education (1988-1990).

Prior to government service, he practiced law at two Washington, D.C., law firms: Covington & Burling and Foreman & Dyess. He also was a law clerk to U.S. District Court Judge Joseph H. Young in Baltimore, Maryland.

Kolb received his undergraduate degree at Princeton University and did graduate work at Balliol College, Oxford University, from which he received a Master’s Degree in Philosophy, Politics, and Economics. He holds a law degree from the University of Virginia School of Law where he was Editor-in-Chief of the Virginia Journal of International Law. He is also the author of a book on policymaking in the first Bush White House and numerous law review and op-ed articles.
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