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Lesser Known Ways to Lower the Budget Deficit
Ten years ago, the U.S. government was projected to have a budget surplus by 2011, but a series of misguided policies mixed with a severe economic downturn during the intervening years upended the nation’s fiscal health, instead leaving the government more than $10 trillion in debt as of this year.
In the face of so much red ink, legislators on both sides of the aisle have proposed a variety of harsh cuts in a desperate attempt to balance the budget once again. These cuts include proposals to slash Medicare spending (while forcing seniors to shoulder most of the costs), raise taxes on all Americans, or at least those households earning $250,000 or more a year, and even eliminating hundreds of millions of dollars in spending on community health programs for those in need, the last of which was actually signed into law as part of a budget deal passed earlier this year.
It should come as little surprise to anyone that fixing a $10 trillion budget hole would require some extreme measures, but before legislators take drastic steps that could significantly worsen the standard of living for many Americans, shouldn’t they exhaust every option that would bring the deficit down without hurting households first?
MainStreet has rounded up some of the less talked about options that the government has to cut costs and potentially shave off billions from the budget deficit. These steps may not be enough to bring the country’s balance sheets back into the black, but it’s start.
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Eliminate Business Meal Deductions
Much of the budget debate in recent months has focused on whether to tax corporations and the wealthy (and how much to tax them), but it may finally be time to discuss eliminating certain tax deductions as well. As a prime example, the Center for American Progress notes that workers can currently deduct half the cost of entertainment and meals with clients as a business expense, depriving the government of hundreds of millions of dollars in tax revenue each year as a result. It may be a nice perk, but is it really necessary?
Estimated savings: $10 billion by 2015
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Phase Out $1 Bills
As nice as it is to have some crisp dollar bills in your wallet, the federal government could save billions by taking $1 bills out of circulation and replacing them with dollar coins instead. According to a report this year from the U.S. Government Accountability Office, bills wear away faster than coins, which means the government has to spend more long-term to print new bills than it would if we relied solely on dollar coins. Other countries have phased out low currency bills for this reason, but the question remains whether Americans are willing to do the same.
Estimated savings: $5.5 billion during the next 30 years
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Switch to Cloud Computing
At its core, the government is essentially a big business made up of many, many departments, and like any major business, it spends a good amount of money on information technology to handle day-to-day computing tasks. In fact, according to one 2010 report from the Brookings Institute, the federal government spends $76 billion a year on these technologies, of which some $20 billion goes toward “hardware, software and file servers.” But the group found that switching to cloud computing – or online-based software and storage options – has the potential to cut these hardware costs by anywhere from 25% to 50% each year.
To its credit, the government has begun working to adopt this computing system across all of its agencies.
Estimated savings: $5 billion - $10 billion each year
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Sell Off Unused Buildings
Like any household, the government has supplies that it doesn’t need, but for the government, these excess supplies include some 1.2 million properties around the country that are currently going unused. The Obama administration recently proposed taking steps to begin selling off this property to generate revenue for the government, but any concrete steps are still pending congressional approval.
Estimated savings: $15 billion in the first three years
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End Cotton Subsidies
While it hasn’t received quite as much attention as the proposed cuts to Medicare and military spending, many legislators have turned their attention to billions of dollars worth of agriculture subsidies passed in previous decades when farmers were struggling to sell their crops. Indeed, one piece of the budget proposal from Rep. Paul Ryan (R-Wisc.) calls for cutting some $30 billion worth of subsidies during the next decade.
But even if this measure proves too extreme for some inside the beltway, legislators might at least hone in on the billions in subsidies the U.S. pays out to farmers for growing cotton at home, a policy that originates from back in the 1930s during the Great Depression when cotton was less of a mainstay than it is today. If that’s not enough, the U.S. government also recently instituted a policy to pay out nearly $150 million each year in cotton subsidies to farmers in Brazil (part of an agreement to stop Brazil from imposing a tariff on our exports).
Estimated savings: Up to $2.2 billion a year in subsidies at home (as of 2009) and/or $147 million a year in cotton subsidies for Brazil
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Phase Out Paper
One of the more common sense – and painless – options for reducing government spending is simply to have all government agencies digitize their workload and correspondences. According to a report from Sen. Tom Coburn (R-Okla.), the government could save hundreds of millions each year by eliminating paper print-outs.
Estimated savings: Up to $440 million each year
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Tax Online Sales
The idea of imposing any new taxes is typically viewed as political suicide in Washington (even if a majority of Americans support the idea of raising taxes on the wealthy), but even if income taxes remain unchanged for most or all Americans, there are other milder taxes that can be imposed to raise revenues. Case in point: imposing an online sales tax.
At the moment, just a handful of states charge sales tax for online purchases, but one recent study from a price comparison website found that if sales taxes were mandated at the national level, it could generate $10 billion or more each year in the near future. Plus, it would make it easier for struggling bricks-and-mortar retailers to compete with e-commerce companies.
Estimated savings: Nearly $11 billion in additional tax revenue in 2012 alone
Photo Credit: Amazon.com
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Forfeit the Ethanol Fuel Tax Credit
Even programs with the best intentions can prove to be wasteful. In 2010, Congress passed a $5.4 billion tax credit to oil companies that produce more gasoline blended with ethanol, thereby incentivizing them to rev up the use of ethanol in this country. It was a bold idea to limit our dependence on oil, but there was one downside: There were already laws on the books requiring oil companies to blend gas with biofuels like ethanol, and indeed, in 2010, Congress increased the fuel standard to triple the amount of biofuels in use during the following decade. With that in mind, the Government Accountability Office criticizes the tax credit as being a duplicate program, and one that will cost the government $5.7 billion revenues this year alone, and comparable amounts if it is extended past the end of 2011.
Estimated savings: $5 billion or more in annual revenues if extended into 2012 and beyond.
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