How to reduce government spending--really!(National Affairs)

• Author: Weidenbaum, Murray

THE FISCAL CHALLENGE facing the U.S. is awesome. The overall numbers seem closer to exercises in astronomy than economics, notably a cumulative deficit for 2011-20 of upwards of six trillion dollars. Nevertheless, that unprecedented array of Federal budget deficits can be cut back. The place to begin is on the spending side.

Discussions on reducing budget deficits invariably have focused on tax policy rather than on the outlays being financed because economists, lawyers, and others participating in that debate know more about taxes than government expenditure. Anyone filling out IRS Form 1040 knows the intricacies of the Internal Revenue Code. Moreover, the ramifications of tax increases and spending reductions basically are different. Budget cutting means reducing benefits to specific interest groups, while major tax issues affect a much broader range of citizens--and voters.

Moreover, concentrating on the expenditure side provides a special incentive. The more that budget cuts are made, the less pressure there will be for raising taxes. The basic approach followed here is embodied in an old Budget Bureau slogan, "Good budgeting is the uniform distribution of dissatisfaction." The point is not to pick on just a few interest groups. If the budget cutting is to be effective, every ox must be gored. Indeed, if the budget cuts are comprehensive enough, no interest group can complain about being picked on.

Recipients of Federal expenditures thus are highly concentrated in specific segments of the population. This special relationship holds whether the category of analysis used is the type of expenditure (notably purchases of designated goods and services) or the location of the industries and groups which are benefitted. Virtually every dollar of government expenditure is a dollar of income--and usually of a specific benefit--to someone.

As a consequence, the typical situation for any government expenditure program is to generate a limited clientele whose members are benefitted more directly--or at least so they think--from the particular government expenditure than they would be from the relatively modest general tax reduction that might be permitted by eliminating the program for which the expenditures are made.

The traditional stance is to focus almost exclusively on the trio of taxes, entitlements, and defense spending--bemoaning or, at least assuming, that the rest of the Federal budget is too small to bother with or composed of essential day-to-day activities of government. Those assumptions do not hold up to serious scrutiny of budgetary details. That "all other category" contains a wide variety of marginal and special interest activities that are ripe candidates for the chopping block.

Let us start with the subsidies in the budget with the most substantial price tags. Year in-year out, the farm price supports am the largest in the Federal budget. They benefit a group of the American population (farmers) whose income typically is significantly higher than that of the average taxpayer--by five to 17% every year since 1996. These subsidies primarily go to the largest farms and agribusinesses. Despite all of the political talk about protecting the family farm, only a minority...