The New York Times has an interactive feature today that lets common ordinary folk just like you and me take a whack at solving the deficit issue, giving you two goals to hit: Clearing the projected deficit in 2015 ($418 billion) and in 2030 ($1.3 trillion). Presumably you’ll also hit all the marks in between.
Well, I’m concerned about the deficit, so I thought I would give it a try, and I’m delighted to say that in fact I did manage to curb the deficit quite handily, cutting over $430 billion from the budget in 2015 and over $1.5 trillion from 2030. How did I do it? The link in this paragraph will take you to my actual worksheet, but if you’re lazy I’ll hit the highlights below.
My particular formula combines both cutting the size of government and trimming back some entitlements (yay! I’m conservative!) while also recognizing that taxes aren’t evil and in some cases should be raised for the overall benefit of society (yay! I’m a liberal!). It works out to 58% of the reduction coming from spending cuts and 42% coming from tax increases, which I think is perfectly reasonable.
(Update, 10:43 am: Adding in what I should have noted earlier — in doing this I’m working from the options provided by the interactive feature, which are both limited and elide over annoying little details that are nonetheless relevant. My own real-world choices would be similar to the choices I make here, but with some probably more subtle distinctions and details.)
Domestic Programs and Foreign Aid
In this category I leave pretty much everything untouched except for the number of people employed by the government, choosing to reduce the government workforce by 10% and to eliminate 250,000 contractors. I assume the contractors will be let go at the end of their contracts and the government workers through retirement and typical attrition. This saves $29 billion in 2015 and $32 billion in 2030.
Only two things touched here: I reduce the size of our nuclear arsenal (because I figure 1,000 nuclear warheads is enough to nuke the planet sufficiently) and I draw down our Iraq/Afghanistan troop numbers to 60,000 in 2015. This saves $70 billion in 2015 and $187 billion in 2030.
This is where the biggest savings come in. For you conservatives out there, I institute medical malpractice reform, which I know you’ve been itchin’ for. Don’t say I never did nothing for you. I also increase the Medicare eligibility age to 68, although I’ll note that if people really howl about this one I can take it out while still covering the projected deficits for both years. But the huge item here is capping Medicare growth starting in 2013, tying it to GDP growth plus one percent. Now, before everyone begins griping at me about this, I’ll note that in 2030 I’ll be 61, which means I’m putting these reforms on my own tab, and the tab of my own generational cohort. Sorry, Gen X. We’re the ones taking the hit, as usual. But on the other hand we’re saving $45 billion in 2015 and a staggering $631 billion in 2030.
You know, if memory serves, when Social Security first started, the life expectancy for the average American was only about a year beyond the retirement age of 65. Now life expectancy is closing in on 80 years, so you can spend 15 years collecting Social Security. This longevity is one reason why I don’t feel entirely bad about deciding to raise the Social Security retirement age to 68 (it was already going up to 67). Once again, it’ll be me and my generation working those extra three years, and I’m fine with that. I also trim down the Social Security benefits for high income folks (more accurately have those benefits determined by a slightly different formula), because you know what? They generally have better retirement set-ups and as a high-income sort of person, I’m fine suggesting to other folks like me that we can probably get along just fine and let the government tend to those who have actual need. This saves $19 billion in 2015 and $125 billion in 2030.
The estate tax, gone this particular year (if you’re a billionaire, your heirs want you to die now!!!) will be coming back, although for my part I choose the Lincoln-Kyl formulation of it, which is a 35% tax on estates larger than $5 million, indexed to inflation. So relax, death tax hysterics; you’re almost certain not to get hit. I also boost capital gains and dividends taxes to 20% on high income investors, because 20% is not an onerous tax rate. Likewise I let the Bush tax cuts expire on people making $250,000 or more a year. Don’t wring your hands for the well-off, folks. I assure you we can afford it. I also boost payroll tax on high-income folks so that 90% of incomes are covered (it’s about 80% now). This saves $126 billion in 2015 and $259 billion in 2030.
New Taxes and Reforms
Two things here: One, I implement the Bowles-Simpson plan, which gets rid of a number of tax loopholes but then also generally lowers tax rates overall, which I suspect benefits most people with relatively uncomplicated tax profiles. Two, I institute a bank tax, because you know what? After spending a trillion dollars in the last couple of years to bail them out of their own greed-fueled stupidity, I think it’s fine to use taxes to put something aside for the next time their greed-fueled stupidity gets the best of them. This saves $148 billion in 2015 and $278 billion in 2030.
That’s how I would do it. Your thoughts? How would you do it?