Crunching Numbers: Americans Take Deficit Crisis Into Own Hands

July 29, 2011 — -- ABC News' Jonathan Karl gathered five average Americans of various ages, genders and political parties today to see whether they could reach a solution on the budget crisis.

The participants ranged from a Tea Party member to a liberal Democrat:

Leslie Echols, a mother turning 50 next month, Democrat

Megan Nabaviania, a single mother, 30, voted for Barack Obama and might vote for him again, but likes what she hears from Republicans in Congress

Barbara A Schauer, a member of the D.C. Tea Party, fiscally conservative and not socially, a civil engineer who liked the Tea Party critiques of the budget and the Federal Reserve

Drew Greenblatt, a small business owner

Tim McBride, liberal in his 20s, a junior and president of his student body at American University

Given only an hour, they hashed it out in attempts to reduce the budget by between $2.4 trillion and $4 trillion. While the GOP contends that $2.4 trillion is needed to give President Obama his debt-ceiling increase, most observers argue that $4 trillion would prevent a credit rating downgrade.

They accepted the $1 trillion in cuts already agreed to by the GOP and Democrats, and set out to tackle the more difficult proposals on entitlement programs, taxes and defense. They quickly got stuck on taxes.

'No' to Home Mortgage Reduction

They rejected a plan to eliminate the home mortgage deduction, which would mean no deducting interest payments that Americans spend on their homes.

Leslie Echols said the plan wasn't a good idea.

"For many Americans, that's the only deduction that they have," she said.

"I don't think we should be doing anything to disincentivize people from buying houses right now," McBride said.

They disagreed on getting rid of the Bush tax cuts for people making more than $250,000 -- a proposal that would save $1 trillion.

Echols said she was in favor of the idea but Greenblatt said that proposal targeted small-business owners like himself.

"It's not rich people you're hitting," he said, "you're hitting small businesses, which means that if you have 20 employees, you're not going to be able to afford some."

Don't Raise Taxes on Businesses

Nabaviania said that she favored the proposal if it exempted businesses.

"If you're a household residence, then I absolutely agree with [eliminating Bush tax cuts]," she said.

"The idea to exempt business is a good idea," McBride said. "If we're talking about reducing the deficit and we're talking about cuts, government programs disproportionately go toward lower-income people. It's not going to hurt the economy to do this."

But Greenblatt disagreed.

"This will increase unemployment. This will stop investments," he said.

They kept the conversations going and found lots to agree on -- for example, gradually raising the Social Security retirement age to 68, which would save about $70 billion.

When it came to increasing the corporate tax rate by 1 percent -- a savings of between $800 billion to $1.2 trillion -- most of the group were in favor.

"I personally like that idea," McBride said. "We also have seen during this economic recession corporate profits remain pretty intact."

But Greenblatt asked whether the group wanted U.S. factories to move their businesses abroad.

"Our tax rates are higher than China," he said. "France has lower rates that we do. We're not competitive.

"You want us to be more competitive so that factories move here and thrive here and prosper here," Greenblatt added. "Then we'll hire more people and we'll have less unemployment."

He said he wasn't in favor of a tax increase on corporations but did want loopholes closed.

Ethanol and Farm Subsidies Addressed

Besides ending ethanol subsidies and reducing farm subsidies, they also discussed defense cuts in civilian salaries and reducing the stockpile of nuclear weapons.

"No reason to have that much nuclear weapons when we're not going to use it," Nabaviania said.

At the end of the hour, the group had reached $2.5 trillion in deficit reduction.

"If we're five people, and if five people can't make one agreement, then that tells you a lot about what's actually going on in the House right now," Nabaviania said.