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Polling Americans on the Deficit

This week, the Economist/YouGov Poll asked Americans how they would like to ultimately balance the federal budget. While I think the aggressive fiscal policy is necessary in the near-term, eventually as a nation, we will have to make some difficult choices in balancing the federal budget. When pollsters asked people whether they preferred raising taxes or cutting spending in order to balance the budget, cutting spending was “more popular…by a margin of 62% to 5%.”  I find this percentage of Americans who do not want tax hikes surprisingly small.  With the unemployment rate staying at elevated levels and the economy struggling, approximately 49%–nearly HALF– of all Americans will pay no federal income taxes at all for 2009. This is an amazingly high number and implies that in a room of 100 average Americans, 49 of those people will not pay federal taxes this year and a mere 5 of them would rather cut spending than raise taxes.

Talk about rational choice!  Half of the room would stand to benefit from increased government spending and an increased tax burden on the economically well off.  Put another way: It would be in the economic self-interest of a non-taxpayer to want both increases in the tax rate and increases in spending, yet somehow they prefer neither option.  Moreover, when asked how exactly to cut spending (with respondents allowed to select as many as may apply), by far the most popular answer was to cut foreign aid–71% agreed–followed by the environment (a distant 29%) and a trio of mass transit, agriculture, and housing (at 27%).  Hat tip to the Economist for the poll.

Foreign aid checks in at slightly less than 1% of our entire federal budget (Wikipedia), yet somehow 71% of Americans feel as though it should be cut.  We can cut 100% of our foreign aid and it would have a negligible impact on our deficit.  If anything, that is an argument for INCREASING foreign aid.  Our country does far too little in order to both help with global problems and build good will on an international level.  Notably low on the list of areas for spending cuts was social security, at 7% of respondents.  Is so because to many, the tangible benefits of the Social Security are witnessed first-hand on a regular basis, while the benefits from foreign aid are more distant and abstract.  The idea of improving the world we live in apparently does not strike a chord with many Americans and the lack of respect for the environment and mass transit confirm this phenomenon.

I was happy to see that the area in which I would most likely to see spending cuts–agricultural subsidies–enjoyed a somewhat healthy number of supporters (22%..please note: these numbers in parenthesis represent percentage of respondents in the Economist/YouGov Poll).  Cutting these subsidies would help make food cheaper for Americans and would help relieve some of the financial distress that consumers are suffering from. These handouts were designed when most farms were owned by people in their personal and individual capacities–the true pioneer American/small farmer.  Now many of these farms are owned by vertically integrated international agribusiness conglomerates.  Coincidentally, during my morning subway ride, while reading Joseph Stiglitz’ Making Globalization Work (yeah I’ve been reading quite a bit of Stiglitz lately…) I reached his section on agricultural subsidies which included the following statistics:

…the vast bulk of the money goes to large farms , often corporate ones.  These subsidies have become simply another form of corporate welfare.  Looking across all crops, some 30,000 farms (1% of the total) receive almost 25% of the total amount spent, with an average of more than $1 million per farm.  Eighty-seven percent of the money goes to the top 20 percent of the farmers, each of whom receives on average almost $200,000.  By contrast, the 2,440,184 small farmers at the bottom–the true family farmers–get 13 percent of the total, less than $7,000 each.  The huge subsidies…actually drive out the small farmer.

Not only do these subsidies hurt the small farmer in America, they have global implications for the cost and access to food in developing countries.  While developing countries are advised to pursue their competitive advantage within the context of a globalized free trade regime, they cannot compete with the pricing power that is subsidized by the U.S. government with regard to food growth:

”  When farming becomes more lucrative because of the subsidies, the demand for land is increased, driving up the price.  With the price of land so high, farming has to become capital-intensive.  It has to make heavy use of fertilizers and herbicides, which are as bad for the environment as the increased output is for farmers in the developing world.  As a result, small farmers, who don’t have the resources for this kind of capital intensive farming, find it attractive to sell out to large farmers and cash in the capital gain.  As land increasingly moves to the large farms, with their heavy use of fertilizers, herbicides, and technology, output increases further, and those in the developing world are hurt once again.”

I’ll save my next budget rant for a later date–military spending (22%)–but will end with this teaser: most people I speak to are unaware of the fact that spending for the wars in Iraq and Afghanistan are not counted in our fiscal spending calculations and that they receive special budgetary treatment.

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