name ______Block ____

Deficit-busting:can You make the Grade?

make your own tough choices To cut the deficit

avoid the tough choices that

would actually bring the deficit under control? Many policymakers and pollsters think the problem begins with voters, who often disagree about what spending cuts and tax increases they'd support. A Kansas farmer doesn't want to have farm subsidies cut—and a big city mayor will fight hard to keep funding for a new housing project.

So a long-term solution to the deficit crisis will begin with each citizen deciding what they're willing to give up—and then backing the politicians who have the courage to make those painful and difficult choices.

Why do members of Congress and Presidents

IMAGINE YOU WERE IN CHARGE FOR A DAY.What cuts would you make, what taxes would you increase? Lead or Leave, and a number of top economists and policymakers, believe that the deficit should be eliminated. In this activity, you try to cut the deficit in half. Follow your teacher's instructions and work together to reach a consensus about what cuts you would make and what tax increases you would approve to reach your goal of $150 billion in deficit reduction. Think about the implications of your choices: Who gets hurts, who bears the biggest burden, who is helped, how hard would a special-interest group fight to block your cut or tax increase.

TAX INCREASES

(ONE-YEAR REVENUES

IN BILLIONS)

Boost corporate income tax rate to 36%...... 5.5

Restrict business meal/entertainment deductions to 50%...... 3.4

Tighter enforcement of taxes on foreign companies in U.S...... 2.0

Scale back home interest deduction for mortgages over $300,000...... 2.7

Eliminate business deduction for factory equipment...... 28.8

Tax charitable donations...... 14.9

Tax some employer-paid health insurance...... 22.6

Tax interest earned on state and local debt held by average Americans...... 15.0

Proposed broad-based energy tax (5%)...... 19.4

Impose a 5% national sales tax; excluding food, housing, medical care...... 56.1

Raise gasoline tax by 25 cents/gallon...... 64.8

Cigarette tax doubles (from 24c to 48c)...... 3.7

Alcohol tax increase...... 4.7

User fees on parks and other public lands...... 6.9

Tax air pollutants...... 44.3

SPENDING CUTS(ONE-YEAR SAVINGS

IN BILLIONS)

Defense cuts (pick only one of next two items):

Reduce defense spending by 10%...... 27.8

Cut/scale back 10 specific weapon systems...... 14.2

Cut by 50% Department of Energy R&D for nuclear materials...... 2.5

Limit yearly increases (COLAs) on Social Security and RR Retirement...... 16.8

Cut SS/Medicare benefits to elderly making over $100,000/yr...... 22.0

Control health-care costs

Control Medicare (general health care)...... 15.8

Cap Medicaid (health care for poor)...... 24.0

Cut 10% from non-defense programs (education, training, social services)...... 25.0

Reduce by 50% the National Endowment for the Arts & Humanities...... 0.5

Cut half of Congress’ budget1.4

Freeze federal agency overhead (maintenance, security, utilities)...... 4.8

Eliminate funding for cancer research and prevention...... 5.0

End outdated federal programs (subsidies)...... 3.8

Federal pay freezes for two years2.3

Cut 100,000 federal employees by attrition (retirement)...... 2.3

Reduce White House budget by 25%...... 1.0

Eliminate community development grants...... 3.1

Wipe out fraud in the Food Stamp program...... 1.5

Require college students to pay in-school loan interest...... 2.1

Increase financial support of U.S. forces by host countries...... 2.3

Eliminate Head Start (government sponsored pre-school)...... 3.0

Reduce NASA funding...... 4.0

Reduce veterans’ disability benefits...... 2.0

Cut by 50% international humanitarian assistance...... 3.1

Reduce education funding...... 5.0

Eliminate some transportation grants (highways, airports, & mass transit) ...... 4.5