04/27/2011 06:53 pm ET | Updated Jun 27, 2011

A Political Prisoner's Dilemma: Reducing the Deficit

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Get Out of My Life, but First Could You Drive Me & Cheryl to the Mall

is a perfect metaphor for the American public's understanding of deficit reduction. A majority of the public supports deficit reduction. A majority of the public opposes the necessary budgetary and revenue changes to fix the deficit.

In mid-April, over half of respondents in Washington Post - ABC News (Post-ABC) poll disapproved of the handling of the national deficit. Yet, over half rejected small increases in taxes and modest reductions in Medicare and Social Security to reduce the deficit. The math doesn't work. You can't solve the problem without addressing the solutions.

A December 2010 Pew survey found nearly two-thirds of respondents thought the best way to fight the deficit was to cut major programs and raise taxes. Yet, a majority from each party (i.e., Republicans, Democrats, and Independents) opposed raising Medicare premiums, eliminating the home mortgage deduction, and gradually raising the Social Security retirement age.

Get the rich guy is the only solution accepted with unanimity. In the Post-ABC poll almost three-quarters of respondents approved raising the taxes of Americans with incomes over $250K. In the Pew poll, regardless of party affiliation, a majority approved of raising the social security contribution cap and reducing Social Security for high-income seniors.

The public wants gain without pain. The report from The National Commission on Fiscal Responsibility and Reform (Simpson-Bowles Report) lays out the problem and a solution in stark terms. Fix the problem or by 2025 government revenue will only cover interest payments of debt, Medicare, Medicaid, and Social Security. That's it. Everything else like education, Homeland Security, infrastructure, or even environment will be buried under debt. The problem can only be solved by modifications to the big three: Medicare, Medicaid, and Social Security, as well as, reductions in discretionary government programs and changes to everyone's taxes. Everyone takes a hit.

Deficit reduction means everyone has to give up a small amount of perceived or actual entitlement so that future generations can win: A public policy prisoner's dilemma (See Wikipedia Prisoner's Dilemma). As any game theorist will tell you, the solution to the Prisoner's Dilemma is cooperation, a scarce commodity in Washington.

If we can glean anything from these polls, it's that the public will support non-specific deficit control measures, almost any measure that does not appear to come from their pocketbooks, and increases in taxes for high earners. The Simpson-Bowles Report easily has $400B of savings through 2020 from proposals that meet these criteria. In addition, there are changes to Social Security wage caps and cost of living modifications that reduce our Social Security shortfall by over 50% by 2050.

Recent news suggests that the Senate "Gang of Six" is proposing $3 in cuts to $1 in tax increases as a deficit reduction solution. Clearly, members of both parties will need to accept the ire of their bases for such a solution to be accepted.

In a recent op-ed, Peggy Noonan mused about the Republican Party's need to capture centrist support to win the Presidency and the Party's potential to ravage itself and alienate centrists in primaries dominated by the far right. It is mathematically impossible to have over 52% and 65% of respondents (WP-ABC poll) strongly against cuts to Medicaid and Medicare without including solid centrist views. While the potential Senate cure deserves high praise, it seems the public is still confused about taking its medicine.