Big Deficits, Bigger Expectations

30 Aug, 2012

By Doug PinkhamAnchor
Public Affairs Council President
August 30, 2012

Americans don’t much like Washington. And they’re not afraid to say so.

Only 1 in 3 has a favorable opinion of the federal government, the lowest rating in the past 15 years, according to a recent Pew Research Center poll. The 2012 Public Affairs Pulse survey says only 4 in 10 have faith in the government to solve the nation’s most important problems.

With federal deficits mounting and public trust eroding, this seems to be a perfect time to downsize the government. That is, in fact, what will happen if Congress doesn’t act to avoid major reductions under the sequestration rules mandated by the Budget Control Act of 2011. You can also bet that any deal to avoid sequestration will still reduce the federal budget.

Yet Americans aren’t necessarily ready to live with a smaller government. A Harris poll revealed little support for reductions in the largest government programs, including Social Security, education and health care. In fact, more people wanted to increase spending for those programs rather than cut them. Only 4 in 10 tea party supporters wanted to see federal aid to education reduced.

The public also opposed cuts in highway financing, revenue sharing with states and cities, and federal job training. Only a handful of programs — like foreign economic and military aid — were considered expendable.

I’ll leave it to others to debate the economic impact of massive budget reductions, but there is no denying the fact that some level of cuts is inevitable. How will they occur? And will the public be OK with a government that does “less with less”?

Congress and the White House have at least three options for addressing government spending. The first option, as New Jersey Gov. Chris Christie said at the Republican National Convention, is for politicians to “change polls through the power of [their] principles.” By communicating the need for shared sacrifice, it may be possible to increase public support for major deficit reduction. Yet it’s hard to imagine that this approach alone would convince the public to get used to a streamlined government.

A second option would be to scale back deficit reduction, or agree on cuts that wouldn’t take place until the distant future. This approach would cut the deficit on paper without causing as much immediate pain to voters. But it would mean we would have to go through this same excruciating process year after year. Remember, sequestration was the result of the so-called supercommittee’s failure to reach consensus on deficit reduction. If it had reached an agreement, the looming “fiscal cliff” wouldn’t be nearly as steep.

Option three would be tax reform combined with deficit reduction. This may be the most logical approach, but it will be extremely difficult to achieve in a hyperpartisan environment. The last major tax reform act, passed under Republican President Ronald Reagan in 1986, was sponsored by Democrats and designed to be revenue-neutral. It lowered individual rates, cut billions of dollars in loopholes and increased corporate taxes.

What’s likely to occur is an attempt to achieve all of the above. We’ll see a series of immediate budget cuts, combined with commitments to do more in the years ahead and a willingness to examine tax reform. Deficit hawks, concerned about kicking the proverbial can down the road and uneasy about the prospects for tax reform, will try to maximize near-term reductions.

If they succeed, Congress will have to convince people to accept reduced funding for entitlements, education and other sacred cows. If that message doesn’t sell, politicians will have a lot to worry about in the next election.

That will lead the nation’s leaders — both Republicans and Democrats — to look to the private sector for help. But this time, Congress won’t be asking companies to lend their management ingenuity and political support. They’ll be looking for them to fill in the funding gaps.

How do we know? Two years of polling by the Public Affairs Council shows that the public wants companies to step up and help meet societal needs.

According to the 2012 Public Affairs Pulse survey, strong majorities of the public say businesses should take on more financial responsibility for solving national problems that have traditionally been government’s responsibility:

  • More than 7 in 10 say business should provide community services such as food banks and job training for the poor.
  • Sixty-eight percent say business should do more to improve the quality and affordability of health care.
  • Two-thirds say business should help improve the quality of education.
  • Sixty-two percent say businesses should shoulder more of the burden for providing relief for disasters like hurricanes, floods and earthquakes.

Now, keep in mind that the question wasn’t whether these services should be outsourced to the private sector. The poll results show that most people expect companies to pay for services that would normally be provided by government.

While many corporations have robust corporate citizenship programs, few are prepared to fill in major gaps created by the withdrawal of government funding. How will they respond?

It’s always important for companies to talk about their good works, especially when they can articulate how their efforts have created long-term value for customers, employees and local communities.

But one of the major public affairs challenges Corporate America will face in the years ahead will be to articulate the limits of its generosity. It’s one thing to supplement government services; it’s another to replace them. Companies will have to learn to manage expectations.

In addition, leading firms, especially those with a history of corporate responsibility, should serve as conveners to bring together public and private interests working in social services, education, health care and disaster relief. While corporations may not be able to take the place of government, they can certainly help craft new approaches that meet essential needs.

That would be a major contribution, and it’s one that plays to the strengths of businesses. In a society struggling to get by with reduced public services, innovative thinking may not be what Congress will ask for — but it’s what everyone will need most.

Comments? Email me.