How Would You Fix The Budget? Here’s How I’d Do It

Thanks to an interactive web tool from The New York Times we can all try to make the hard political choices needed to fix the budget mess.

Professor Stephen Bainbridge points me to an interesting little feature The New York Times has up today that allows you to attempt to balance the budget by 2015 (which requires $148 billion in savings) and 2030 (which requires 1.355 trillion).

Here’s how I did it:

Domestic and Foreign Aid

  • Cut foreign aid by half
  • Eliminate earmarks
  • Eliminate farm subsidies
  • Cut pay of civilian federal workers
  • Reduce federal workforce by 10%
  • Cut 250,000 government contractors
  • Other cuts
  • Cut aid to states

Military

  • Reduce troops in Asia and Europe
  • Cancel or delay big ticket weapon systems
  • Reduce Non-combat military compensation and overhead
  • Reduce troops in Afghanistan and Iraq to 60,000 by 2015

Health Care

  • Medical malpractice reform
  • Raise medicare eligibility to 68
  • Reduce tax break for employer funded health plans

Social Security

  • Raise eligibility age to 68
  • Means test benefits
  • Tighten disability benefits
  • Change inflation metric

Taxes

  • Lincoln-Kyl estate tax plan
  • Allow Bush tax cuts to expire for incomes over $ 250,000/year
  • Eliminate loopholes, reduce rates (Bowles-Simpson plan)
  • Convert mortgage deduction to a tax credit
  • Bank tax

This plan results in a balanced budget by 2015, and by 2030, and consists of 62% in spending cuts and 38% in tax changes.

It’s obviously a radical plan, and I’m sure someone will point out that a lot of this is politically difficult to accomplish at best, but this goes right to what I said on Wednesday when the Bowles-Simpson plan was released:

If we lived in a country with adult political parties, the release of the Commission’s report would serve as the beginning of a long overdue national conversation about how to get our fiscal house in order. Liberals would recognize that social spending would have to be cut, and conservatives would recognize that defense spending cuts and tax increases would have to be on the table. Instead, what we’re likely to see is more of the same political gamesmanship — liberals accusing the GOP of wanting to starve Grandma, conservatives accusing liberals of just wanting to raise taxes so they can spend more. And the debt will continue to rise.

At some point we’re going to be forced to deal with these problems, but it’s not going to happen until we start feeling the pain that we could ward off if we’d just grow up already

What would you do ?

FILED UNDER: Economics and Business, US Politics
Doug Mataconis
About Doug Mataconis
Doug holds a B.A. in Political Science from Rutgers University and J.D. from George Mason University School of Law. He joined the staff of OTB in May 2010 and contributed a staggering 16,483 posts before his retirement in January 2020.

Comments

  1. URL is broken.

  2. My fault, bad copy & paste.

    Fixed now

  3. It seems to leave out a lot of options. For instance you can choose to add means testing to Social Security, but not Medicare. You can add a sales tax, but only at one particular rate and only as an addition to income tax, rather than as a replacement for it.

  4. It isn’t a perfect tool, obviously, and it’s largely based on the proposals being considered by the Commission, but it’s a fairly good guide to the kind of choices that have to be made if we’re going to fix this problem.

  5. Well, the other problem is that it doesn’t contain any sort of measure of political viability. It was pretty easy to just run down the list clicking almost everything and solve the deficit before I’m even through most of the list, yet I have no illusions as to the chances my particular policy preferences have of being passed into law.

  6. Joe Mucia says:

    It seems to me that cutting the federal workforce by 10%, loosing 250,000 government contractors, cutting aid to states, and cutting big weapon systems would spike the unemployment rate and send the economy into another recession, especially considering there would be no additional money for tax cuts seeing as this would only bring the budget into balance rather than surplus. A recession would lower the revenue the government brings in, leading to yet another deficit.

    As long as the federal government is able to borrow at low interest rates, the best solution is not drastic austerity measures but rather further stimulus and state aid combined with a focused effort to address the rising health care costs that are the key factor in future debt projections.

  7. Brett says:

    Here is what I did:

    -Reduced Federal Workforce by 10%
    -Cut number of contractors by 250,000
    -Reduced military to pre-Iraq War size and pulled troops out of Asia and Europe.
    -Reduced noncombatant overhead and compensation
    -Reduced troops in Iraq and Afghanistan to 30,000 by 2013

    -Enact malpractice reform
    -Raised Medicare eligibility to age 70
    -Reduced tax break for employer health insurance

    -Raised Social Security age to 70

    -Used Obama’s proposal on estate taxes.

    -Allowed expiration of tax cuts for 250,000 and above
    -Raised the payroll tax limit higher

    -Created a higher 1,000,000 tax bracket
    -Bowles-Simpson plan on eliminating loopholes.
    -Implemented a Carbon Tax

  8. Bryan Pick says:

    Geez, even with their limited options, I didn’t have to cut the military to get on the right track.

    * Eliminate earmarks
    * Eliminate farm subsidies
    * Cut pay of civilian federal workers by 5%
    * Reduce the federal workforce by 10%
    * Other cuts to the federal government
    * Cut aid to states by 5%

    * Enact medical malpractice reform
    * Increase the Medicare eligibility age to 70
    * Reduce the tax break for employer-provided health insurance
    * Cap Medicare growth starting in 2013

    * Raise the Social Security retirement age to 70
    * Reduce Social Security benefits for those with high incomes
    * Tighten eligibility for disability
    * Use an alternate measure for inflation

    * Eliminate loopholes, reduce rates (Bowles-Simpson plan)
    * Carbon tax

    Even without certain other spending cuts I would make, that cuts the $418 billion shortfall in 2015 down to $55 billion, and gives us a $259 billion surplus in 2030. Politically impossible, sure, but it even gives us room to cut certain inefficient taxes.

  9. Rock says:

    I used the NY Times app and balanced the budget without touching the military with plenty of money in excess to bail out the postal service, pay off a few Unions, buy a car company or two and buy out the rancid Tea Party trash. Possibly enough left to pay hush money to Sarah Palin.

    But yes, many options and possible solutions are missing. My first priority would be to fire the Czars. Many others . . .

  10. TG Chicago says:

    I’m confused. The Mataconis plan says:

    Domestic and Foreign Aid
    *Eliminate earmarks

    But what happened to the idea that eliminating earmarks wouldn’t really help anything?

    https://www.outsidethebeltway.com/the-senates-most-conservative-member-eliminating-earmarks-wont-save-one-dime/

    What did this NTY gizmo say that “eliminating earmarks” did to help the budget? Do you think the effect they ascribe to eliminating earmarks is realistic?

  11. Linda says:

    Mine is:
    Domestic Programs and Foreign Aid:
    -Cut foreign aid in half
    -Eliminate earmarks
    -Cut pay of civilian federal workers by 5 percent
    -Reduce the federal workforce by 10 percent
    -Other cuts to the federal government
    -Cut aid to states by 5 percent

    Military:
    No cuts at all. I firmly believe we need a strong, well trained, equipped, and maintained Armed Forces.

    Healthcare:
    -Enact medical malpractice reform
    -Reduce the tax break for employer-provided health insurance
    -Cap Medicare growth starting in 2013

    Social Security:
    -Reduce Social Security benefits for those with high incomes
    -Tighten eligibility for disability
    -Use an alternate measure for inflation

    Existing Taxes:
    -The Lincoln-Kyl proposal
    -Payroll tax: Subject some incomes above $106,000 to tax

    New Taxes and Tax Reform:
    -Eliminate loopholes, reduce rates (Bowles-Simpson plan)
    -Reduce mortgage-interest deduction by converting to credit
    -Bank Tax

    Surplus of 47 Billion by 2015, and 117 Billion by 2030.

  12. john personna says:

    I played with this a bit this morning. It seemed that if you tackled Social Security and Medicare it was pretty easy to make big jumps in the right direction.

    Now many of these cuts were politically impossible a month or two ago. I guess the cynical optimist in me wonders what will happen if Republicans stop pretending, and stop campaigning on impossible budgets.

  13. Dave Schuler says:

    I went through the exercise and, obviously, it’s not hard to balance the budget, viewed from this vantage point. I think the harder, more realistic question is how do we craft a consensus for balancing the budget using means that won’t cause the U. S. or world economies to collapse?

    So, for example, Doug’s preferences for reducing the federal workforce by 10%, cutting 250,000 contractors, and reducing aid to states, as was pointed out above, sound better in theory than they could well work out in practice. Theoretically, I’m in favor of all of them. But it needs to be done over time. I think that if it were done now, all at once, it would increase the number of unemployed by about 1 million (250,000 federal workers, 250,000 contractors, 500,000 state and local government workers). That’s too much right now.

    Similarly, while I think that reducing the number of U. S. troops in Asia to 60,000 by 2015 is probably practical (further reduce troops in Iraq, reduce troops in Afghanistan, remove troops from South Korea and Okinawa, closing bases in the Middle East), reducing the number to 15,000 by 2030 may not be, at least not without seriously compromising U. S. interests and destabilizing a big swathe of the globe.

    I’m also concerned about changing eligibility of Social Security and Medicare for those who are over 60 now, which is implicit in the assertion that doing so wil have any effect on the 2015 budget. How are they going to save for it at this point? Is throwing numbers of the elderly into poverty programs good public policy?

    The really big savings require constraining growth in Medicare spending. I’m in favor of it but how do we accomplish it? I think does so requires that healthcare providers be willing to take a pay cut. Doesn’t sound particularly likely to me. Actually more like handwaving.

  14. Tano says:

    So here is how a liberal would do it. 35% from tax increases, 65% from spending cuts.

    Eliminate farm subsidies.
    Reduce nuclear arsenal to 1050 warheads etc.
    Cancel or Delay some Weapons programs
    Reduce troops in Iraq/Afghan to 60K by 2015

    Malpractice reform
    Reduce tax break for employer-provided health insurance
    Cap Medicare growth starting in 2013
    Tighten eligibility for disability
    Alternate method for calculating inflation

    Obama’s Estate Tax proposal
    Obama’s Cap Gain proposal
    Expire Bush Tax Cuts over 250K
    Surtax on income over 1 million
    Simspon Bowles plan to eliminate loopholes etc.

    Thats a 6 billion surplus in 2015, and 149 billion by 2030.

  15. john personna says:

    I think Dave Schuler sounds like Obama 😉

  16. James says:

    Civil: Any program that empowers the Federal Government, diminishes we the People.

    Military: The troops on foreign soil are a buffer Zone, when the enemy is here it’s too late.

    Civilization: There are 5 fazes to a Civilization, we are in late faze three.

    Veterans: I had lunch with Tony, his wife Mary Nov.11, 2010 at a local Dinner, Applebea’s that provided free lunches. Tony served in Vietnam and suffers from Agent Orange Syndrome. Freedom comes with a Price, hats off to Tony, Mary, and others.

    Note: I will visit the V.A. hospital for electronic ears.

    “There are no solutions, only compromise” Walter Williams PHD

    James from the flat lands of Texas

  17. Dave,

    I think the harder, more realistic question is how do we craft a consensus for balancing the budget using means that won’t cause the U. S. or world economies to collapse?

    That’s my question too and, as I noted in my Wednesday post, I think the more likely outcome of this debate is demagogic rhetoric from left and right rather than a discussion of what needs to be done to fix our problems.

    The Times tool is obviously limited, but I think it’s a useful exercise at least in pointing out that if we’re going to do this there can no no sacred cows and that everything has to be on the table

  18. john personna says:

    Actually TL, Schuler talks about the fine line between tackling things soon, but not too soon.

    I think Obama has already given voice to that, and been heaped with a solid round of criticism, by folk who offer no particulars of their own.

    Now, it would be nice if someone did put these things on a ramp right now, with multi-year phase-outs and phase-ins. (Of course we can never use a 5-year interval, because “5 year plans” bring out the crazies.)

  19. john personna says:

    BTW, as a historical note, this was the week when I first saw “IOKIYAR” and learned what it meant.

  20. Gerry W. says:

    No problem here on most of the cuts. My problem is dealing with today’s globalization and our infrastructure.

    We still have to invest in our country whether it is oil independence, to high speed internet, to high speed rail, to a new air traffic control system. We are also some 2 trillion dollars behind on our infrastructure while the political parties went on their pet projects and neglected our country.

    We need to invest in our people (globalization) with massive retraining programs to preserve the middle class.

    And we need to invest in the future with more in federal grants to universities and to entrepreneurs to provide for the jobs of tomorrow and jobs that will stay in our country.

    The Bush tax cuts should be eliminated to the rich as there is no proof that they create jobs as our jobs go overseas. Maybe the tax code can be changed in their favor in other ways.

    I would eliminate the Bush tax cuts to the middle and lower class so that you can pay for the infrastructure and rebuild our city centers and prevent urban sprawl. This would help small business more than tax cuts. The Bush tax cuts is spent money and provides little more than welfare. It does not solve our problems.

  21. steve says:

    I think everyone missed the fine print. Choosing the Social Security at age 70 option requires that you be willing to change your job to farm laborer.

    ” I think does so requires that healthcare providers be willing to take a pay cut.”

    Docs make up 6% of the health care budget. How much are you going to cut?

    Steve

  22. DC Loser says:

    Civilization: There are 5 fazes to a Civilization, we are in late faze three.

    The Dept of Education obviously has more work to do.

  23. Dave Schuler says:

    Docs make up 6% of the health care budget.

    Physicians aren’t the only healthcare providers, Steve.

  24. Teresa says:

    I don’t agree with all of this, but I must admit, it IS a true compromise between liberal and conservative ideas.

    If i were a congressperson voting on this, one thing I would insist on adding is letting health insurance companies compete across state lines. I am convinced that doing this would bring costs down even more drastically than med malpractice reform.

  25. Dave Schuler says:

    Unless I’m misreading this according to Kaiser, physician/clinical services and hospital care account for 52% of all healthcare costs in the U. S. I also suspect that those areas also influence most other healthcare cost areas.

  26. Tano says:

    “one thing I would insist on adding is letting health insurance companies compete across state lines.’

    So, would this be part of a general approach of taking insurance industry regulation away from the state level and making it a federal responsibility?

  27. Patriot214 says:

    We need to reverse all of the big government programs that got us into this mess. When the framers founded the country, there was no social security, medicare, unemployment, etc. Thomas Jefferson specifically warned about the negative affects of having a central bank. Obviously, we cannot end all of these programs overnight. Millions of Americans are currently dependent upon them or are employed because of them. We need to put a plan into action that gradually reduces the size of the federal government and restores the free market that we have been losing since the 1930’s.

  28. wr says:

    Teresa — You’re absolutely right. Because letting credit card companies compete across state lines certainly increased competiton and brought down interest rates. It’s not like they all moved their headquarters to the two states that allowed 30% interest and essentially no oversight. No, they all competed feverishly, and that’s why credit card interest rates are now only a point or two above what the companies pay for the money.

    Oh, but wait. This would be completely different. Because freedom!

  29. anjin-san says:

    > When the framers founded the country, there was no social security, medicare, unemployment, etc.

    There was also no White House, U.S. Air Force or interstate highways. Guess we will be phasing all of those out.

  30. James says:

    The Dept of Education obviously has more work to do.

    Loser Mountains, PHD, MBA, BS, BA when you live on Loser mountains your vision
    is Cloudy.

  31. john personna says:

    I think education can definitely be improved while lowering costs. We aren’t using technology like we could.

    Unfortunately Democrats make a costs-first argument that spending more will improve education, while Republicans … well, they’re mixed up. Some want to eliminate the Department, and some want it to administer more tests.

  32. G.A.Phillips says:

    ***Cut pay of civilian federal workers by 5%*** why only 5%

    ***Reduce the federal workforce by 10 percent*** why only 10%

    .
    I had it with like 12% increase and 100% cuts because of crap like above. I say it can be done with only cuts, cuts.cuts……

  33. c.red says:

    Here is a 50/50 proposal that allows +166 B in 2015 and +8B in 2030 –

    Domestic programs and foreign aid
    • Eliminate farm subsidies
    • Cut 250,000 government contractors

    Military
    • Reduce nuclear arsenal and space spending
    • Reduce military to pre-Iraq War size and further reduce troops in Asia and Europe
    • Reduce the number of troops in Iraq and Afghanistan to 30,000 by 2013

    Health care
    • Enact medical malpractice reform
    • Increase the Medicare eligibility age to 68
    • Reduce the tax break for employer-provided health insurance
    • Raise the Social Security retirement age to 68
    • Reduce Social Security benefits for those with high incomes
    • Use an alternate measure for inflation

    Existing taxes – Modifying estate taxes
    • President Obama’s proposal

    Existing taxes – Investment taxes
    • President Obama’s proposal

    Existing taxes – The Bush Tax Cuts
    • Allow expiration for income above $250,000 a year
    • Payroll tax: Subject some incomes above $106,000 to tax

    New Taxes and Tax Reform
    • Eliminate loopholes, reduce rates (Bowles-Simpson plan)
    • Carbon tax
    • Bank Tax

    Now most of my choices here are common sense to me rather than actual budget cutting. Specifically going after the budget, I would probably raise taxes quite a bit more. For instance: the tool wouldn’t let me to choose allow expiration for <$250K and the eliminate Loopholes option, and I feel the corporate loopholes are the higher priority. I don’t see why those would be related, but the tools seems to think they are. I’m not certain I would reduce the military to what they are calling for: I wouldn’t mind seeing some pullback from European bases – Korea and Okinawa not so much. I definitely wouldn’t reduce the military AND reduce Foreign Aid (soft power, so to speak.)

    Also I see no problems raising investment and estate taxes to Clinton Levels; taking Obama levels is purely a concession to those that whine about taxes. I seem to remember the country and corporations did pretty well in the 80s and 90s, so it couldn’t have been too much of a burden to bear.

    Chris Redifer