Academic

That NY Times budget calculator

By Tung Yin

I've been playing around with the NY Times's budget calculator, which lets you choose different spending cuts and tax increases to see how you would balance the budget.  There aren't as many options as I'd prefer, but my proposal generates a budget surplus of almost $200 billion by 2015 and $600 billion by 2030.  I suppose with such projected surpluses, I could go easier on the spending cuts/tax increases, but I'd start paying down the debt.

This is a great little tool, because it makes it seem so easy to balance the budget.  Just check the boxes you prefer and keep going until you fill enough of the "deficit boxes."  It makes you wonder why Congress can't get its act together and agree on some cuts and some taxes.  (My cut/tax ratio is 60/40, but of course, reasonable minds can disagree.)

I thought I would take a stab at justifying my choices:

1) Eliminate earmarks ($14 billion savings in 2015/$14 billion in 2030) -- There's something vaguely undemocratic about earmarks in the sense that I, as a US taxpayer, have no ability to vote out the Representatives/Senators who are earmarking things paid for by my taxes for the specific benefit of those person's constituents.  I suppose that can be true in general of legislation, but earmarks seem like the basest form of politics.

2) Eliminate farm subsidies ($14 billion/$14 billion) -- Farmers are already overrepresented in Congress and have disproportionate political power because they are discrete, insular, and able to vote cohesively.  It's why Iowa keeps sending a very liberal Senator and a fairly conservative one back to Congress.  They bring home the bacon.

3) Cut 250,000 government contractors ($17 billion/$17 billion) -- I preferred this to cutting government workers or government salaries.  I'm sure there are some overpaid federal employees, but I didn't really see any in the branch of the federal government that I worked (the courts).  I'm dubious that a cut in federal salaries would reach the right places.

4) Reduce nuclear arsenal and space spending ($19 billion/$38 billion) -- We have enough nukes.  And spending defense should be aimed more toward terrorism than Cold War-era ballistic missiles.

5) Reduce military to pre-Iraq size and further reduce troop size in Asia and Europe ($25 billion/$49 billion) -- Enough with protecting the rest of the world.  They can start raising their own troops.  Yes, I realize that we want to protect them, because it allows us to project force anywhere.  I'm not against keeping some troops in Europe and Asia.  We just don't need as many as we have now.

6) Cancel or delay some weapons systems ($19 billion/$18 billion) -- I grew up in a military industrial complex household, but everyone needs to share in the cuts.  Fancy weapons can wait.

7) Reduce the number of troops in Afghanistan to 60,000 in 2015 ($51 billion/$149 billion) -- This was the less drastic of the two troop reduction options.  I'd like this as a goal, but of course, events on the ground might change the feasibility of it.

8) Enact medical malpractice reform ($8 billion/$13 billion) -- Not a lot of savings here, but I think it's still a good idea to ward off "defensive medical practice."

9) Reduce tax break for employer-provided insurance ($41 billion/$157 billion) -- This tax increase would hurt most of us, because employers are likely to raise the co-pay on premiums or maybe even drop coverage altogether (though that's maybe unlikely given settled expectations about health care/employers).  But I'm serious about eliminating the deficit, so I'm going to share in the pain.

10) Cap Medicare growth starting in 2013 ($29 billion/$562 billion) -- It's pretty amazing when you click on this box to see how many of the "deficit boxes" get filled.  This by itself solves 40% of the estimated 2030 budget deficit!  It's not even a "cut" in Medicare; it slows the growth in costs to GDP + 1%.  In a perfect world, we'd treat everyone for everything.  But we don't have the resources for it.

11) Raise Social Security retirement age to 68 ($13 billion/$71 billion) -- I'm not that keen on raising the retirement age because younger workers are already getting shafted by the Social Security system.  But this is better than raising the retirement age to 70.  I realize that on this issue, though, I have the kind of job that would make it relatively easy to work until 68 or later.

12) Reduce Social Security benefits for those with high incomes ($6 billion/$54 billion) -- Not as much savings there as I would have expected but this is pretty obvious.  I'd actually be even more aggressive about the means-testing than what is proposed here.  It's not punishment to say to Warren Buffett, "You are a great man and you have done very well for yourself.  You don't need Social Security income."

13) Use an alternate measure for inflation ($21 billion/$81 billion) -- Even if the current measure is accurate, we all need to share in the pain.

14) Return estate tax to Clinton era levels ($50 billion/$104 billion) -- I'd crank the estate tax even higher if that were an option.  Two words to justify: Paris Hilton.

15) Return investment income tax rates to Clinton era levels ($32 billion/$46 billion) -- The stock market would take a hit, but this would also be more progressive in that the wealthy have a higher proportion of income from investments than from salary.

16) Allow expiration of Bush tax cuts for $250,000 and up ($54 billion/$115 billion) -- I admit to picking this option instead of the allowing expiration on everyone option because I wouldn't be affected by this option,and maybe I'd be more consistent with the other option.  But hey, I've already generated budget surpluses!

17) Subject some payroll taxes above $106,000 to payroll tax ($50 billion/$100 billion) -- If we do more aggressive means-testing for Social Security benefits, then I probably wouldn't go here as well.  But with modest means-testing, I'd raise the payroll tax cap.

18) Millionaire's tax ($50 billion/$95 billion) -- "You've done very well for yourself, congratulations.  Be generous."

19) Bowles-Simpson plan ($75 billion/$175 billion) -- Simpler taxes.  More revenue.  I didn't go with the more severe option here, which would eliminate the same tax breaks but give smaller tax bracket decreases.  I like the 60/40 spending/tax increase ratio that I have, and the other option would make it 55/45 (which is certainly reasonable).

20) Reduce mortgage interest ($25 billion/$54 billion) -- I could be persuaded to get rid of the whole thing.  But at a minimum, it should be reduced in scope.

The prevailing view is that no politician could actually propose anything like this (or even a different ratio of cuts/taxes) without getting tossed out of office, and that's probably right, but why?  Are we Americans so unwilling to face reality that anyone who tells us the hard truth needs to be shot as a messenger bringing bad news?

Full post as published by The Yin Blog on November 16, 2010 (boomark / email).