Deficit Reduction Through Budget Cuts Puts Poor at Risk

Cutting Entitlement Would Have Regressive Effect

Deficit Reduction Through Budget Cuts Puts Poor at RiskThe Center for Budget and Policy Priorities (CBPP) has posted on its website an article that points to the flaws in the plan to achieve further deficit reduction solely through spending cuts entailing cutting entitlements that benefit the poor and middle class while shielding the biggest entitlements for the wealthy.

CBPP Founder and President Robert Greenstein writes,

Since President Obama and Congress enacted the ‘fiscal cliff’ budget deal, congressional Republican leaders have vowed not to raise a dollar more in taxes for deficit reduction. All further deficit reduction, they say, must come from budget cuts, primarily from entitlement programs. That, however, would spare the broad category of tax deductions, exclusions, credits, and other tax preferences known collectively as ‘tax expenditures’ — which disproportionately benefit well-to-do Americans and which Alan Greenspan has termed as ‘tax entitlements’ — while putting the onus entirely on spending programs, which disproportionately benefit middle- and lower-income Americans.

Tax expenditures are costly (see Figure 2), and many of them are wasteful. Because tax expenditures disproportionately benefit those at the top while spending programs primarily benefit those in the middle or at the bottom, a strategy that protects the former entitlements while cutting the latter would be highly regressive.

Republicans say that from here on, we should do only spending cuts, focusing on entitlement programs. But their approach to entitlements is highly selective — they seek to cut the entitlement programs on the spending side of the budget, whose benefits go overwhelmingly to middle-class and poor families. But they want no deficit reduction to come from the most wasteful and inefficient of entitlements — those embedded in the tax code.

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