The Joplin Globe, Joplin, MO

Business

December 3, 2012

Small-bore proposals to help avert fiscal cliff

WASHINGTON — Sure the rich may have to pay more in taxes. But a “fiscal cliff” budget deal could mean pain for nearly everyone else, too: higher airline ticket prices, for example, an end to Saturday mail delivery, fewer food stamps and lower farm subsidies.

Each of those changes would make some powerful constituency angry. And even if approved, they would be only a drop in the bucket toward reducing future deficits by trillions of dollars.

Still, all are being looked to as an immediate “down payment” on a deal to avoid the fiscal cliff, a looming $500 billion combination of automatic spending cuts and tax increases in the first nine months of next year alone.

Every dollar counts, even when the totals are pretty modest compared with a trillion dollars in tax increases and equal or bigger cuts to the huge government health care programs like Medicare and Medicaid that drive the federal budget.

That could mean federal workers, including the military, may soon be contributing more toward their pensions. Republicans may revive efforts to deny child tax credit payments to illegal immigrants. In all, the White House says it can generate $250 billion over coming years, including billions of dollars from selling excess federal property.

At issue are a handful of longstanding options to trim the federal budget. Several of them, such as increasing airline ticket fees to pay for Transportation Security Administration operations, are ideas from the budgets of both Presidents Barack Obama and George W. Bush.

The ideas have been blocked by opponents — often powerful lobbying groups like the airline industry or public employee unions. They have come back to life as policymakers struggle for ways to defray annual trillion-dollar-plus budget deficits.

“All this stuff is hard. There’s nothing easy here,” said Sen. Rob Portman, R-Ohio, a member of last year’s failed deficit supercommittee, which sifted through a long roster of budget cuts and new fees. “But if everybody feels like everybody else is contributing, it makes it easier.”

The supercommittee developed a roster but never nailed down any agreements, said an aide to a GOP panel member. If the panel had decided to “go big,” more could have been asked of, say, federal workers or companies with underfunded pension plans. More controversial approaches such as curbing student loan subsidies also might have made it onto the agenda.

The failure of the supercommittee meant that some of the ideas — particularly the less controversial ones — were left vulnerable for plucking by lawmakers, not for deficit reduction but as ways to pay for new spending on things like highways, student loan subsidies and jobless benefits.

Easy-money options like auctioning public airwaves to communications companies ($15 billion over 10 years) or increased fees on mortgages backed by Fannie Mae and Freddie Mac ($36 billion) have been tapped already.

A longstanding 10-year, $749 million proposal to limit coal mine cleanup payments to states where problem sites have already been addressed — long blocked by Wyoming senators — was grabbed this summer to help pay for highway programs, as was a $1.1 billion subsidy for shipping food aid to foreign countries on U.S.-flagged ships.

With the low-hanging fruit already picked, the ideas that remain are generally more controversial.

Take federal workers. They were clipped in February to help pay for extending unemployment benefits for people without jobs for more than six months. Newly hired federal workers now have to contribute an additional 2.3 percent of their pay toward their pensions. That move came after a huge behind-the-scenes battle in which Washington-area lawmakers like Sen. Ben Cardin, D-Md., succeeded in stifling an effort to make existing workers to contribute more as well.

“Federal employees are the only group in America that’s been asked to make a sacrifice with respect to the national debt. They’ve had their pay frozen for three years in a row. They financed the payroll tax cut extension,” said Rep. Gerry Connelly, D-Va., whose suburban district near Washington is home to 58,000 active federal workers. “They’ve already given.”

So what’s left?

Lots of things that promise to irritate people while doing little to curb the deficit. But as the saying goes, “a billion here, a billion there, and pretty soon you’re talking real money.”

A compromise proposal sure to anger airlines and their passengers alike would double from $2.50 to $5 the fee per nonstop flight, meaning that the price of a typical roundtrip ticket would rise $5. It would raise $1 billion a year.

There’s a longstanding proposal to raise prescription drug copayments for active duty and retired military and to require some to use a mail order program for drugs to treat chronic conditions.

Cutting farm subsidies and food stamps also is being eyed as an alternative to the automatic, across-the-board spending cuts in January. Members of the House and Senate Agriculture committees are struggling to reach a deal on comprehensive farm bill before the end of the year. Even if they do, the potential 10-year saving are not that great: between $23 billion and $35 billion, including $4 billion to $16 billion in food stamp cuts.

Efforts to stem losses by the Postal Service by allowing it to cut Saturday delivery and close facilities seem like even more of a long shot, even though the administration proposed last year to claim $16 billion through such postal changes. A Senate-passed bill doesn’t generate that much savings.

Democrats oppose GOP ideas like curbing student loan subsidies, cutting food stamps and blocking illegal immigrants from claiming refundable child tax credits. Republicans, meanwhile, are anxious about requiring uniformed military to pay more toward their pensions.

Those taking a cautious view say that the roster of proposals — though not as controversial as, say, cuts to Medicare — can be maddeningly complicated.

During the supercommittee, this was supposed to be the part everyone agreed to, recalls the aide to the GOP member. The aide spoke only on condition of anonymity — not authorized to speak publicly and candidly about the panel’s work, virtually all of it secret.

 

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