Americans' 'fiscal cliff' fix? Cut government spending – but not Medicare.

A new Monitor/TIPP poll finds Americans favor cutting government spending to solve the fiscal cliff, but few want to cut entitlements such as Medicare, which make up most of the budget.

As politicians bargain over how to deal with the nation's "fiscal cliff," a new poll hints at why the talks are so difficult: The American public is wary of both broad tax hikes and spending cuts to entitlement programs such as Medicare, which account for about two-thirds of all federal spending.

In fact, "cutting Medicare spending" ranked last with the public among a dozen specific fiscal proposals, in the Christian Science Monitor/TIPP poll, conducted over the past week.

At the same time, Americans are concerned about the size of budget deficits and about the rising national debt. The poll results also suggest some openness to a possible bargain between Republican and Democratic leaders, which would would involve both spending cuts and new tax revenue.

Specifically, the public appears open to raising taxes on wealthier households. But in asking for a top choice for reducing the federal debt problem, the poll found 65 percent preferred "cutting general government spending." Some 16 percent said that "increasing taxes" was their top choice. And only 12 percent chose a third option, "reforming entitlement programs such as Medicare and Social Security," suggesting that building public support on that front could require both time and bipartisan statesmanship.

"Consensus building is very important," says Raghavan Mayur, president of TechnoMetrica Market Intelligence, which conducted the TIPP poll for the Monitor and Investors Business Daily. "Americans are not in any mood for cutting entitlements, whether it is Social Security or Medicare."

The phrase "fiscal cliff" refers to some $600 billion in spending cuts and tax hikes that are currently scheduled to take effect at the start of 2013, unless Congress takes action. It's a problem of lawmakers' own making. Unable to reach a fiscal deal in 2011, the two parties in Congress gave themselves an incentive to come to an agreement by setting a deadline when automatic spending cuts would kick in alongside the expiration of the Bush tax cuts. 

Economists have warned that going over this cliff could send the country back into recession early next year, slowing the economy and pushing unemployment up as the tax hikes hit home. But avoiding any tax hikes or spending cuts would cause the public debt to keep growing, which could harm economic growth.

With the fiscal cliff increasingly making news headlines, the Monitor/TIPP poll sought to test what policy options the public preferred.

A majority described their current federal tax burden as "about right," and a similar majority (55 percent) supported the the general idea of extending current tax rates for all Americans, rather than letting them expire.

The poll also took the nation's pulse on 12 specific fiscal policy options, including some spending cuts and tax hikes. Only one of them, raising taxes on high-earning households, garnered majority support – a poll result hinting at the politically tortuous choices facing elected officials.

Here are the ideas tested in the poll, ranked by popularity:

• Increase federal income taxes on households earning $250,000 or more (54 percent). 
• Reduce corporate tax rates to a level comparable to other developed nations, but offset the change by eliminating many corporate subsidies and tax breaks (47 percent).
• Increase corporate taxes (47 percent).
• Limit the tax deduction for homeowners with mortgages over $500,000 (42 percent).
• Increase capital gains taxes (39 percent).
• Increase the Social Security payroll tax cap from the present $110,000 to 170,000 dollars (36 percent).
• Cut defense spending (34 percent).
• Introduce a tax on carbon-based fuels (31 percent).
• Increase the top rate of the estate tax to 45 percent from the present 35 percent (24 percent).
• Cut Social Security spending by increasing the retirement age (23 percent).
• Introduce a value-added tax on consumption, on top of sales taxes currently imposed by many states (19 percent).
• Cut Medicare spending (19 percent).

Although this poll doesn't reveal a public stamp of approval for many ideas, it does indicate some guidelines for Congress and President Obama as they negotiate.

First, Americans generally favor having the rich pay a bit more in income taxes. This was the one idea among the dozen that respondents tended to support regardless of their age, income, or gender. (Only 29 percent of Republicans supported the idea, however.) Yet this support goes only so far. Hikes in the estate tax and in Social Security taxes for high earners didn't fare too well. Boosting the capital gains tax also wasn't widely popular. But interestingly, that idea was a bit more popular among investors (41 percent support) than non-investors (37 percent support).

Second, the public appears open to the idea of corporate tax reform – although the poll doesn't give a clear signal on whether the reform should emphasize raising new revenue or making the US a more attractive place to do business, relative to other nations.
 
Third, although defense cuts aren't popular, the public may prefer such spending cuts to new broad-based taxes, such as a tax on carbon emissions or a value-added tax.

Finally, changes to entitlements will probably need to be sold as bipartisan plans to make the programs sustainable and healthy – not just as "cuts." The idea of cutting Medicare spending was deeply unpopular among all age and income groups, and among Republicans as well as Democrats.

Other recent polls have found similar results on several fronts, including the willingness to raise taxes on the rich, the reluctance to see entitlement benefits cut, and the desire to resolve fiscal problems with a balance of changes that emphasizes spending cuts more than tax hikes.