The Programs You’d Have to Cut to Balance the Budget

Several conservative lawmakers say House Speaker Kevin McCarthy has promised a House vote on a balanced federal budget. That’s a harder task than it sounds, given the size of the federal deficit.

More recently, Mr. McCarthy has said he doesn’t want to cut spending on defense, Medicare or Social Security — or raise taxes. Those constraints mean cuts to the rest of the budget would have to be brutal.

“It’s incredibly difficult to balance the budget within 10 years,” said Marc Goldwein, a senior policy director at the Committee for a Responsible Federal Budget, a group that backs deficit reduction. “It goes from being incredibly difficult to practically impossible if you start taking things off the table.”

The federal deficit is expected to be so large over the next decade that it would take about $16 trillion in spending reductions or new revenues to balance the budget by 2033. That’s about the size of the entire Social Security program. Or the entire Medicare program in addition to every anti-poverty program and refundable tax credit. Those outlandish examples come from a recent analysis from the committee.

Balancing the budget without tax increases, or cuts to the military, Medicare or Social Security, would mean cutting the rest of the budget by a whopping 70 percent. Cuts of that magnitude would mean the firings of most federal workers in agencies like the F.B.I., the Parks Service and the State Department, and huge reductions in food assistance and military retirement.

So what would it take to balance the federal budget in a decade?

The Republican Study Committee, a group that includes 173 of the 222 Republican House members, has offered a fairly detailed plan. Its budget includes deep cuts to Medicaid and to discretionary spending on things other than defense, the part of the budget that funds functions like environmental protection, public transportation, medical research and homeland security. But those changes alone don’t get the budget to balance. The committee also relies on significant reductions in Social Security and Medicare to erase the deficit.

The plan’s changes to Medicare include increasing the eligibility age to 67 from 65, gradually rising to 70; increasing premiums for higher earners (while reducing them for lower earners); and reducing federal funding for private Medicare Advantage plans by making them compete on a more equal footing with the government plan.

It would modify Social Security for future beneficiaries by raising the eligibility age for full retirement slowly from 67 to 70 and adjusting the formula so that higher earners receive smaller lifetime Social Security payments.

Ways to balance the budget through tax increases alone

The Congressional Budget Office maintains a list of more than 100 policies that could reduce the deficit. Its catalog had several options that would generate substantial revenue, including a consumption tax similar to those levied by most European governments, increases to income and payroll tax rates, and a new tax on carbon dioxide favored by many environmental groups.

If lawmakers didn’t make any cuts, they could roughly balance the budget by combining several of these large tax increases.

Of course, Republican lawmakers don’t want to raise taxes. Instead, they have tended to favor tax cuts, passing major legislation to reduce taxes in the Reagan, George W. Bush and Trump administrations.

Democrats proposed some tax increases last year, when they were trying to pass their large social spending package, but as a way of paying for new federal spending, not lowering the deficit.

Mixing cuts and tax increases

The nonpartisan Committee for a Responsible Federal Budget has its own plan to reduce the deficit. But it would not balance the budget in 10 years. The plan includes spending reductions in every part of the budget as well as new taxes. By 2032, it would cut the deficit approximately in half, an amount the group believes is sustainable because it would stabilize the ratio between federal debt and the overall economy.

The group’s goal — along with its reputation as a shop of deficit hawks — demonstrates how many politicians and economists reject the very goal of a rapidly balanced budget.

The committee’s budget includes specific policy proposals attached to its reductions. The plan includes a carbon tax, reductions in spending on various parts of Medicare, and an increase in the full retirement age for Social Security by at least a year.

Mr. McCarthy is asking Democrats to make budget concessions in exchange for legislation that would prevent the U.S. from defaulting on its debt and payment obligations. But right now he is not talking specifically about balancing the budget, or about Social Security and Medicare.

Those two programs are very popular, and cuts to them would entail political risk. President Biden, in his State of the Union address, drew boos and cries of dishonesty from Republicans when he said they wanted to cut Medicare and Social Security, though several of them have proposed to do so.

But avoiding changes to Medicare or Social Security really complicates the math.

Social Security represents the largest share of federal spending, followed by Medicare. The programs also represent the fastest-growing parts of the budget in coming years, aside from interest on the debt, as more baby boomers age into retirement and need more health care.

“Health care costs tend to rise as people grow older, so it is not a surprise that Medicare spending is rising each year,” said Tricia Neuman, the executive director of the Kaiser Family Foundation’s program on Medicare policy.

Paul Winfree, a former Senate Budget Committee staffer who is concerned about the escalating federal debt, said it would be impossible to change the long-term trajectory of federal spending without addressing the growing cost of health programs, including Medicare.

“If they don’t meaningfully address Medicare, Medicaid and the federal health care programs in general, it’s essentially a fool’s errand,” said Mr. Winfree, now a distinguished fellow of economic policy and public leadership at the conservative Heritage Foundation.

And Medicare and Social Security aren’t the only popular programs. In 2019, the Pew Research Center polled Americans on which parts of the budget they thought should be bigger, about the same, or smaller. Large majorities opposed cuts to just about every area. Most Americans wanted increased government spending on Social Security, education, infrastructure, environmental protection and scientific research. The budget area where the public would most support reductions is in aid to the poor overseas. Still, only 28 percent said the U.S. government should spend less on that, and foreign aid is on track to represent only about one percent of the federal budget over the next decade.

Leading Republican budget hawks have called some areas of spending inappropriate. A proposal to balance the budget from the Trump-aligned Center for Renewing America takes direct aim at a “woke and weaponized government.” But the highlighted programs are relatively insignificant compared with the size of the deficit. (Added together, these cuts would total $67 million, or around 0.005% percent of the federal deficit this year.)

Most of the center’s major savings would come from reductions in domestic spending, including the repeal of the Affordable Care Act’s health coverage expansion. It also leans heavily on aggressive projections of economic growth that lack historical support. Those assumptions, which differ from the budget baselines used by most other research groups, allow the group to reach balance without having to find as much savings.

“People imagine that the government does a bunch of things that they think are wasteful, and they point to a $10,000 grant,” said Bobby Kogan, the senior director of federal budget policy at the Center for American Progress, a left-leaning research group. He noted that most federal spending goes to direct transfers to individual Americans, so meaningful cuts would almost certainly sting some important voting constituency. “At the end of the day, the budget is over $6 trillion, so if you find me a million dollars of waste, cool,” he said. “But that’s not balancing the budget.”

Should the U.S. balance the budget?

It’s not just fear of that risk that explains the paucity of serious proposals to balance the budget.

Democrats in Congress and the White House are not just opposed to balancing the budget; many oppose deficit reduction as a priority, pointing to the stability of federal bonds and the human benefits that government spending on poverty prevention, health care and infrastructure have on Americans’ lives.

Even many conservative economists don’t view a balanced budget as an important goal for preserving a strong economy. Many suggest focusing instead on maintaining a stable ratio between debt and the size of the economy over time — arguing a larger federal debt can be sustained if the economy is also growing.

The size of that ratio continues to be disputed. But if current trends continue, the debt is on track to grow substantially faster than the economy overall, particularly with recent increases in interest rates. Whether and how that changes depends as much on politics as on math.