Denting the deficit

President Obama is requiring government agencies to find $100 million in savings. Next year's budget deficit will be $1.4 trillion. The new reductions would generate savings equal to 0.007 percent of that — something like trying to deal with a $5,000 credit card debt by forgoing a pack of gum.

We understand the importance of symbolism, and we're all for telling the Department of Homeland Security, as Obama did, that the $3 million it has given to consultants to come up with new logos is more than enough. The trouble is not this acknowledged drop in the bucket; the trouble is that Obama is simultaneously emptying the bucket a lot faster with spending proposals and a reluctance to take steps to really dent the deficit.

Here are a number of policies the administration and Congress could consider if they want to go beyond symbolism. None would be easy, but they would have the potential to generate significant savings or revenue and win at least some bipartisan support.

  • Raise the Social Security retirement age to 68 from the slated increase to 67. As people live longer, it makes sense that they work a bit longer, too. This change could be made gradually, and eventually would save $10 billion a year, with savings left over to strengthen the disability program to protect manual laborers and those who need to retire early.
  • Change the tax treatment of health insurance. The policy of taxing wages but not employer-provided health insurance leads to the over-consumption of health insurance, which contributes to growing health-care costs while creating an unfair tax break for those with high incomes. It would be more sensible to at least cap the tax break at the cost of an average plan, for a savings of $25 billion a year.
  • Reduce farm subsidies, which run well over $10 billion most years. Price supports have led to an industry overly dependent on government giveaways. They should be replaced with a fairer system of self-sustaining insurance. Obama has proposed a fairly timid version of subsidy reform, and even that is running into stiff opposition.
  • Reduce Social Security benefits for the well-off while protecting those who depend on the program. As controversial as Social Security reform is, every serious policy expert recognizes the need for changes, including benefit reductions. Better targeted reductions than across-the-board cuts.
  • The government's transportation trust fund is running out of money. Raise gas taxes, untouched since 1993, or establish a tax on vehicle miles traveled to help pay for the roads and rails that need rebuilding. Airlines and, especially, private aviation need to pay more to upgrade the air traffic control system.

All told, these policies could yield savings and revenue of roughly $75 billion a year. That's not enough to close the budget deficit or meet spending needs, but it's more than a hunt for loose change.

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