231. "Deficit Reductions in a Populist Age: How to Sell
Shared Sacrifice," Challenge, (March-April 1993), pp. 22-25.
Once upon a time, in the far away age of 1991, the President
and Congress could cut a deal, and the public would grumblingly
acquiesce. Political observers commiserated about voter apathy.
Now that the Larry Kings of radio, the call-us-800-numbers, and
populists Clinton and Perot have re-engaged the public, our
political leaders must learn to dance with an eight hundred pound
gorilla. It has already pushed Zoe Baird off the dance floor; it
has had a major say about whether or not gays are going to be
allowed to participate; and it is now wondering if it should fall
in step with the Administration's ideas about deficit reduction.
The OMB is burning the midnight oil trying to figure out the
right size of the deficit cut. Economists argue whether a
deficit reduction of $145 billion by the fiscal year 1997 is
"large enough," while a $125 billion cut is "too small" to
"reassure the financial markets." Others are properly concerned
with timing: Ideally the suggested stimulus would hit as soon as
possible, while the economy still needs a lift, while the downer
that deficit cutting entails should not kick in until next year.
Nobody wants to push down an economy that is just finding its
Lost in these important deliberations, is finding effective
ways to ensure that the public will embrace the suggested
measures. For now the public is rather ambivalent. Only one out
of three sees reducing the deficit as a top priority. And when
asked about which expenditures to cut or taxes to raise, about as
many oppose most specific proposals as are in favor. Gasoline
tax? 42% are in favor but 54% are opposed. Reduce tax breaks
for health insurance? 54% favor but 37% oppose, and so on.
There are no solid majorities (more than 65%) for any substantial
tax increases or significant reductions in expenditures. In
short, unless public support is significantly expanded and
deepened the re-energized electorate will not tolerate much pain.
And all this is before most Americans realize that the pain
they will be asked to tolerate is likely to exceed a quadruple
root canal. A deficit cut by $145 billion entails an income loss
(or expenditure increase) of thousands of dollars each year for
the average American family, at least until the end of century.
It will feel like taking out a mortgage or paying interest on a
college loan -- without getting a house and with the kid still
under foot. It will take a lot more than many inside the beltway
seem to realize to get the public to sweat blood when the most it
expects is some strenuous jazzercise.
In the year I spent in the White House, at least once a
month someone would urge that the President should use his bully
pulpit (or fireplace) to deliver a "really good speech" to the
American people, after which the people were fully expected to
line up behind whatever program the caller favored. Luckily for
our democracy, the public cannot be swung that readily. It took
Roosevelt two years to maneuver the American people into World
War II; and we are still trying to come to terms with the
sacrifices exacted by the oil crisis, the subject of Carter's
1979 malaise speech. Much more than any Presidential speech or
televised townhall meeting in a few cities -- the way the new
budget is developed, and the role the public will play in
fashioning it, will determine where the forthcoming deficit-reduction dance will end.
1. Provide specific outcomes.
Among social scientists there is a grand debate as to what
motivates citizens: their self-interest or their nobler values?
Given the degree of pain we face, it seems best to appeal to both
sides of the self. Citizens have already heard plenty about the
need to sacrifice, about their duty to their children, and about
the need to make America competitive again. Now they need to be
shown what deficit cuts will do for their pocketbook.
For example, according to Data Resource, Inc., if the
deficit is reduced by $100 billion, interest rates on 30-year
treasury bonds would fall to 6.4%; if cut by $200 billion -- to
5.75%. (Other private sector sources provide rather similar
projections). These figures can be translated into equivalent
reductions in mortgage rates and those on small business loans.
In short, into figures that mean something to workers, home
owners, and investors. Economists will correctly point out that
one cannot assuredly promise that the interest rates will fall as
predicted. Other factors, from OPEC to the Bundesbank, might
slow the fall. The President may well wish to be careful not to
swear on a stack of Bibles that the rate will be, say, 5.9% by
Oct 31 1997. But he can state with much assurance, that if the
deficit is cut as suggested, the rates will decline, citing the
predictions of the private sector. Next, everybody from Bentsen
to Reich, to Rubin, would need to remind Americans that as a
result, mortgage and loan payments will fall accordingly.
Indeed, it might be argued, that this way an average citizen
would recoup much of the loss due to higher taxes and fewer
2. Show fairness
People used to say "don't tax me, don't tax thee, tax the
man behind the tree." The promise of specific personal gains,
coupled with a strong appeal to civic duty, may get the public to
cry out "tax me and tax thee" but it is sure to add "as long as
it is equally!" There is nothing so sure to raise the public's
hackles as the feeling that it is being shafted while other
people wallow in tax loopholes, government subsidies and so on.
A study found that the belief that the tax burdens are
unfairly distributed is a more important factor in tax evasion
than their sense that taxes cause a personal financial loss or
hardship (38.9% cited the first cause; 33.3%, the second one).
Though this study is based on what people report about their own
feelings, another study altered the conditions under which people
were asked to "file" their taxes. It found that more people in
this simulation did not pay taxes due when they believed the tax
raise favored one group over others as compared to when they
thought the burden was equally shared.
What is a fair distribution is a subject debated by social
philosophers for centuries and they are not quite done. The best
the White House can do is to ask all interest groups to yield one
or more of their main privileges. Hence, it does not serve at
all, to suggest one day that energy taxes will be raised (which
will hit harder those who live in the colder parts or where they
must travel long distances), and the next day that social
security beneficiaries will be hit. All the oxen must be gored
simultaneously if the public is to feel that the pain is widely
and fairly distributed.
Some economists may scoff that disallowing mortgage
deductions on second homes, revoking exception from the federal
tax on diesel for pleasure boats, removing tax deductions for
pharmaceutical companies who operate plants in Puerto Rico,
imposing a transaction tax on Wall Street, or combining the three
health services of the military into one, are small potatoes,
compared to "going after entitlement programs," where the real
meat is. However, only if scores of interest groups will squeal
all at one and the same time, will the public see and believe
that the burden is widely shared.
3. Consult the public directly.
Studies show that when the public is truly consulted, it is
much more willing to slash deficits. When not confronted with a
love-it or leave-it ready made deficit-reduction package
concocted by Congress and the President, but rather asked how
much and above all what would you cut -- the public swings the ax
with considerable verve.
Some evidence comes from "citizen juries." These are groups
of 18 to 24 individuals, selected by civic leaders to represent
the demographics of the country, that conducted three to five day
deliberations on the budget. The "juries" listened to experts
and politicians, read up on the subject, and dialogued with one
another. When they were done, these representative citizens
concluded that they would cut spending by $49 billion (from
defense, social security and infrastructure[sic]) and raise taxes
by $70 billion (on "sin", gasoline and the rich).
Even when citizens were involved in a less intensive manner,
providing information and above all asking for their specific
advice was still highly effective. A survey of a randomly
selected group of 1,000 Americans, who examined closely the same
range of options usually considered by Congress, favored slashing
the deficit by 62%, significantly more than the President or
Congress are considering. The 1,000 informed and consulted
citizens cut the deficit to $131 billion (Republicans) and $144
How could the public at large be directly involved in the
choices at hand? The answer, granted, is somewhat far-fetched.
Imagine that after consultation with Congress that the President
addressed the public one Sunday afternoon. Instead of merely
exhorting us to sacrifice, he would outline, say, three
alternative ways in which the deficit might be curtailed. One
might include a VAT, which contains higher taxes on sin and
energy and lower (or no) taxes on food, books, some forms of
housing and health care. The second package would entail raising
taxes on the rich and scaling back entitlements. The third -- on
higher income taxes across the board and cuts in numerous
government services. All would include the same amount of cuts
in defense and foreign aid. The key is that all the options
should have been previously agreed upon by the President and
Congress. This requirement ensures that whatever the public
favors will be enacted and that the suggested plebiscity serves
to round off and deepen representative democracy -- but not
replace it. Oddly enough, the President and Congress might find
it easier to reach an agreement on three options rather than one
because it might require less consensus-building.
Rather than giving an immediate response, the public would
be accorded time, say until Tuesday evening, to deliberate on the
options and discuss them with one another. Without any
government prodding, the next forty-eight hours would turn into
one giant teach-in, with most editorials and radio and
television shows discussing what we should cut rather than
whether. On Tuesday evening the White House would open a set of
telepollers, allowing millions of people to call in their
responses. (Simple devices must be built in to avoid "ballot"
stuffing. For instance, people might be asked to dial in their
social security numbers and be informed that if the computer
finds two responses preceded by the same social security number,
both would be thrown out automatically.)
This may seem farfetched even in the age of 800 numbers and
interactive TV. However, without finding some way to actively
involve the re-engaged public, beyond a few televised town hall
like meetings, significant deficit reduction is unlikely to
muster the broad and strong civic support it requires.
4. Build credibility into the program.
When Alan Greenspan, the chairman of the Federal Reserve,
recently testified before Congress, he hinted that if there was
to be a "real" deficit reduction package, the Federal Reserve
might well help nudge down interest rates. Greenspan did not
explain why he introduced a distinction between two breeds of
deficit reduction: real vs. unreal. He hardly needed to. The
public is quite aware of what Greenspan was referring to. We
have already had several grand White House/Congressional deals
that promised to cut expenditures to provide for both some
program expansion and deficit reduction. Later, the cuts turned
out to be largely illusory while the new expenses were all too
real, causing even more humongous deficits.
The most famous of these unreal budget deals is the Stockman
magic asterisk. When Reagan submitted his first budget proposal
to Congress, the figures would not add up; there were more
expenditures than revenues. The gap was "closed" with an
asterisk that indicated that $44 billion of expenditures to be
cut were "to be identified." After Congress approved the budget,
these cuts were never made and the deficit swelled by that much
Other favorite sleights-of-hand include optimistic
assumptions about the future growth rates of the economy (leading
one to assume this will yield higher tax revenues), shifting
military pay dates from one fiscal year to the next, and sweeping
costly items off the budget. For the Clinton administration
suggestions that introducing "managed competition" would yield
major savings in health care could turn out to be one such false
Once one accepts that "real" cuts must be made if the
deficit reduction is to be able to deliver the promised results
and gain the public trust, there is a long list of devices that
could help enforce the belt-tightening commitments, although none
of them can be made iron-clad. Using realistic rather than rosy
assumptions about the future of interest rates, inflation, and
growth; multi-year commitments; strong enforcement mechanisms
(e.g. requiring a super majority to raise expenditures mid-year),
procedures for further cutting expenditures if revenues fall
below limits (or raising taxes further if expenditures exceed
forecasts) are all of merit. It might be difficult to ask from
politicians, to be upfront about what must be done. However,
given the public state of mind, straight talk might work better
than politics-as-usual, at least at this time.
All this may seem a lot of steps to court the public.
However, without actively involving the citizenry, the President
will be left to the tender mercies of Congress, many of whose
members are deeply in hock to special interests. And only if the
public will be truly involved, will it support the considerable
belt tightening the accumulating debt seems to require.
Moreover, an informed and consulted public will turn out to be a
much more supportive partner than a public merely drawn in. With
the proper attention, a swell dancer might be coaxed out of that
Amitai Etzioni is the author of the forthcoming book The Spirit of Community,
(Simon and Schuster, 1994) and editor of the communitarian quarterly,
The Responsive Community. He may be reached at firstname.lastname@example.org.