New Report Advocates Cutting Spending on the Rich

 As the United States faces mounting deficits, legislators should avoid tax hikes and consider cutting spending on the rich to yield over a $1 trillion in savings over the next decade

NEW YORK, NY – Members of Congress have increasingly demanded large tax hikes on upper-income families to finance large spending increases on top of soaring baseline deficits. But even the most aggressive tax hikes on the rich would make only a small dent in the long-term budget deficits while significantly harming the economy.  

In a new report, Manhattan Institute senior fellow Brian Riedl proposes a better approach. He explains that rather than taxing the rich more, we should spend less on them. This bipartisan strategy would achieve both the redistributive goals of the left and the spending restraint goals of the right. Such upper-income spending cuts have several advantages over new taxes. In addition to promoting political compromise, cutting spending to the rich will avoid rising taxes’ damage to economic growth while better targeting unnecessary deficits and allowing more future policy flexibility. 

Riedl looks at three specific programs—Social Security, Medicare, and farm subsidies—where the government can expect to save up to $1 trillion over the decade, and substantially more thereafter.  

• Social Security could significantly reduce its long-term liabilities by eliminating annual cost-of-living adjustments for the wealthiest seniors, and modestly reducing their benefit formulas. This would primarily affect four million retiree households with more than $1 million in investable assets.  
• Medicare’s tremendous deficits could be addressed by reducing Medicare Part B and D subsidies to the wealthiest retirees. Unlike Medicare Part A, these sub-programs are not “earned” with prior payroll taxes, and thus do not represent traditional social insurance. There is little reason to subsidize millionaires.  
• Federal farm subsidies cost more than $20 billion per year and primarily benefit families earning more than $166,000 in annual income. The agriculture industry is remarkably stable and thriving, and yearly income volatility can be addressed with no-net-cost insurance programs.  

Put together, these policies pare back spending and increase progressivity—without burdening the economy with painful taxes.

Click here to read the full report.