Reducing The Deficit

My colleague Dave Schuler has an excellent post on the hard choices involved in making the federal budget sustainable. He also offers the following cuts:

I may as well express my preferences for cutting the deficit as well: reduce healthcare spending (along the lines suggested above), cut military spending by reducing our military commitments in Iraq, Afghanistan, Europe, and East Asia and reduce the size of the Army, means-test Social Security, modernize the providing of services by the federal government and cut the federal payroll, eliminate pensions for elected officials, reduce federal employee’s pension plans, eliminate agricultural subsidies, start phasing out the building of new interstate highways or the expansion of old ones, reserve capital spending by the federal government for things that really are for the “general welfare” rather than for particular welfare. I support a carbon tax.

I agree with all of the above with just one minor quibble: I’d eliminate all subsidies, not just agricultural ones. But other than that I think that Dave’s direction is the best way to move forward.

For the record, though, it won’t actually be the way it happens. But it’s a good one.

FILED UNDER: US Politics,
Alex Knapp
About Alex Knapp
Alex Knapp is Associate Editor at Forbes for science and games. He was a longtime blogger elsewhere before joining the OTB team in June 2005 and contributed some 700 posts through January 2013. Follow him on Twitter @TheAlexKnapp.

Comments

  1. Nominate everyone to a cabinet level position in the Obama administration. That ought to generate a windfall of new revenue.

  2. Jeff says:

    Isn’t a carbon tax a subsidy for “green energy”, robbing Peter to pay Paul ?

  3. Jeff says:

    just asking but if you tax carbon then people will need to shift to something else. What else is available ? on a national and local scale ? Thats works ? Today ?
    That last sentance you quote makes him look very unserious despite his apparent seriousness prior to that. Kind of refutes his own arguments.

  4. Alex Knapp says:

    Jeff,

    A pure carbon tax doesn’t provide any subsidy. It captures the externalities associated with use (pollution, etc.). Additionally, it helps put the market back in the right direction to make up for decades of fossil fuel subsidies.

    Wind is already more cost-effective than coal, and solar is heading in that direction. If people are paying the PROPER price for their fossil fuels, the market will shift when alternative tech is ready. Moreover, there will be incentive to develop more efficient versions of alternative tech. In the meantime, it will lead people and businesses into making their spaces more energy-efficient and make such energy-efficiency more cost-effective.

  5. Steve Plunk says:

    If we start throwing in every outlandish externality we can make every traditional source of energy cost more and make inefficient sources seem more reasonable. I guess it depends on who’s adding up the “costs”.

    Wind and solar are intermittent sources of power and are inefficient. Coal, oil, and gas are abundant, efficient, and possess an infrastructure already in place. We also discover these resources faster than we deplete them. Unless we want to fundamentally change our economy and likely damage it we should continue using these fuels. A crappy economy does not generate tax revenues like a robust one.

    As far a deficit reduction I doubt we will see any while this President and Congress are in power.

  6. Wayne says:

    Carbon tax will increase our energy cost and run down the economy. Yeah that will really help our deficits. To lower deficits we need to increase energy supplies to help grow the economy. If wind is more cost-effective then let us stop subsidizing them and let the market decide. I bet on coal.

    It amazes me when so many people want to cut the military spending then complain when we need them they don’t have all the equipment and people that they need. If you want to go back to being isolationist, fine but don’t complain when a good part of the rest of the world tear themselves apart.

    Personally the military, intelligence agencies, and interstate systems including ports are about the only thing the federal government need to be involved in. Do away with all subsidies including education.

  7. john personna says:

    The problem with these spending reductions is not that they are bad, but that they suffer from the same path-dependence as always. That is, you can’t get there from here.

    Any incremental reduction is someone’s ox gored first, and congress (to my eye) just isn’t willing to gore any oxen.

    BTW Steve Plunk, I’d say GHG are not an “outlandish” externality … but what I’d consider a safe and sane carbon tax suffers from the same path problem as above. So it doesn’t really matter.

  8. john personna says:

    BTW2, I hope you carbon tax hot button folks know that you are taking energy away from deficit reduction talk when you go off on this tangent.

    And no Wayne, a carbon tax does not kill the economy, only a high carbon tax does that. No one sane is proposing a high carbon tax.

  9. spago says:

    HA! We agree again…but then…we disagree. But this isn’t a post about a carbon tax…more bad news for Phil Jones and climatology (you like that)…and wind energy sucks.

  10. Gerry W. says:

    Well, we are really in a pickle. Democrats don’t want to cut entitlements and republicans do not want to raise taxes and want further tax cuts. Add to that, years of failed ideology that has given us high unemployment. Having jobs will reduce the deficits, however, you can’t have jobs if our jobs go overseas. And to have jobs, you need to invest in our country, in our people, and in the future and that requires more spending in which we did not do in the first place. Fixing the budget requires Commissions to get us there and even the republicans have said no to this. However, the president has suggested he can use an executive order. Medicare is in bad shape and needs fixing. Social Security you can tinker with the numbers, but here again we had many years of abuse of our government taking out money from the social security fund. I also believe in cutting into the military, however, we cannot just get up and leave Iraq and Afghanistan. Cutting an aircraft carrier would take away years of preparation and work and would lay off many workers. We are at a point that our country will become ineffective as a world power and we will have to leave world matters and influences to other countries. It looks like China will be in the position to do so. This is a dismal situation and there is very little room to maneuver.

  11. sam says:

    @Wayne

    If you want to go back to being isolationist, fine but don’t complain when a good part of the rest of the world tear themselves apart.

    First, any true blue isolationist would say, of the the tearing apart, “That’s too bad. Hope it works out for them.”

    Second, and more to the point. I’m coming up on 70 years old, and in every decade of my life my country has been at war someplace in the world. In some heretofore unknown shithole, whose existence was brought to the American consciousness only when our troops went in. At some point I think you have ask yourself just how much longer are we going to be doing this? How much longer are we going to be sacrificing our kids and our treasure in an enterprise that is, in no small measure, keeping folks’ chestnuts out of the fire? I think maybe we should do a Gary Cooper and thrown the star down in the dust, “The next time they come to town, you take care of it.”

  12. Dave Schuler says:

    I also believe in cutting into the military, however, we cannot just get up and leave Iraq and Afghanistan. Cutting an aircraft carrier would take away years of preparation and work and would lay off many workers.

    We’ve already left Iraq. It’s the troops that are still there, serving very little useful purpose. And, as I’ve noted frequently, I don’t believe in leaving Afghanistan altogether, just reducing our footprint there, leaving what Ralph Peters has called a “compact, lethal force”.

    And, if you examine my post, you’ll find that I don’t advocate shrinking the Navy although I think that the Air Force and Army should be re-combined and reduced in size.

  13. Brett says:

    eliminate pensions for elected officials, reduce federal employee’s pension plans,

    That would have some interesting effects on the financial markets in the US. If I recall correctly, federal and state pension funds are a major source of investment money in the system.

    eliminate agricultural subsidies

    I’m a little hesitant to wholly eliminate all support for agriculture, since I think it’s a positive for a nation to be able to provide some level of sustenance for itself wholly independent of trade in case a major war ever breaks out.

    If it were me, I’d switch it over to a combination of a direct subsidy aimed things like new seed adoption, irrigation, and so forth. Then abolish all tariffs on all agricultural products except wheat and corn, with the latter two having a tariff rate set in bilateral negotiations with trade partners. The idea would be to go tit-for-tat on subsidies/tariffs for the above two, and let the rest of the agricultural products (the “non-vital” ones) compete in the free market. There’s no reason for the US to be subsidizing peanut production, for example.

    If you want to go back to being isolationist, fine but don’t complain when a good part of the rest of the world tear themselves apart.

    Hard to say. I doubt that would happen in Europe these days – they’re far too integrated beyond mere trade. The Middle East is trickier, but I suspect most of the regimes could probably survive without US intervention (although it would increase the risk of a major war in that area). Africa has and has had a major war in recent years, so things would pretty much be what they are now.

    East Asia is one of the more dangerous ones, which is why I don’t advocate a full pull-out. A US pull-out there would probably cause a major regional arms race, particularly as Japan re-arms. I doubt they’d end up in a major war in an era of nuclear weapons, but things could get pretty unpleasant.

  14. If I recall correctly, federal and state pension funds are a major source of investment money in the system.

    Yes, but only a small percentage of that is for elected officials. Most of it is teachers, police, firefighters, career civil servants, etc.

    In re: food subsidies: the argument that we must subsidize agriculture just in case there is a major war seems to assume that we would stop producing food without subsidies (which is not the case). Further, the odds of a war that would disrupt our ability to feed ourselves strikes me as rather slim.

  15. Brett says:

    In re: food subsidies: the argument that we must subsidize agriculture just in case there is a major war seems to assume that we would stop producing food without subsidies (which is not the case).

    We would probably be producing much less, particularly since other states (particularly in the European Union) are subsidizing their agriculture.

    Further, the odds of a war that would disrupt our ability to feed ourselves strikes me as rather slim.

    I was referring to the possibility of trade in food being disrupted during a major war. In other words, a state that can’t feed itself and is dependent on food imports is SOL if war breaks out and they can’t import food in large quantities anymore.

    Yes, but only a small percentage of that is for elected officials. Most of it is teachers, police, firefighters, career civil servants, etc.

    Ah, you’re right. My bad.

  16. Gustopher says:

    Means testing social security is the first step towards gutting it entirely. It would create a situation where people are paying into the program, not benefitting from it, and resenting those that do.

    By and large, the people of means have also paid more into the system — they are not a problem for the long term sustainability.

  17. Wayne says:

    If you want to tax people then increase an existing tax. There is no need to create a whole new infrastructure and bureaucracy. Increasing energy cost may or may not “kill” an economy but it sure has a negative effect.

    I agree we need to be careful when, where and especially why we deploy our forces but we can’t cut and run every time it gets a little messy. Backing off right now especially in a big way IMO would result the ME blowing up in pretty much a free for all. Chinese would take Taiwan at a minimum. South Korea would be lost. Chavez would find an excuse to attack Honduras or Columbia for starters. Africa may stay the same or there could be an all out push for control with a far greater outbreak of piracy either way. Russia would take greater actions against it former East Bloc. If Europe protests much, the Russian may use that as an excuse to attack some of them. Europe would most likely scramble to catch up in military strength. Hopefully they would stick together but I wouldn’t count on it especially if one country gets a clear upper hand. They may seem best of friends now but that can change quickly.

    I would like to see and believe there is a way for the U.S. to draw back it forces and its responsibilities in the world but it should be done in the right way or it could be a disaster. If we redraw out of despair, there will be blood in the water. If we do it from a position of strength and by encouraging local players to assume the responsibilities and control then we will most likely be fine.

  18. sam says:

    @Wayne

    Chinese would take Taiwan at a minimum. South Korea would be lost. Chavez would find an excuse to attack Honduras or Columbia for starters. Africa may stay the same or there could be an all out push for control with a far greater outbreak of piracy either way. Russia would take greater actions against it former East Bloc. If Europe protests much, the Russian may use that as an excuse to attack some of them.

    Yeah, so?

  19. Pete says:

    Have y’all forgotten about the Fair Tax? The Feds are already talking about a VAT. The Fair Tax is infinitely better and is transparent. How would you like to receive your gross pay instead of your net pay?

  20. anjin-san says:

    Unless we want to fundamentally change our economy and likely damage it we should continue using these fuels.

    You sound like Ayn Rand’s President Thompson. “If I could only make them… stand still”.

  21. anjin-san says:

    Unless we want to fundamentally change our economy and likely damage it we should continue using these fuels.

    You sound like Ayn Rand’s Head of State Mr. Thompson. “If I could only make them… stand still”.

  22. Brett says:

    First off, let me say that while I think we should have a smaller army and less direct force projection overseas, that does not mean that we should stop indirect influence. In other words, troops in South Korea? No, unless the North attacks. Weapons sales and aid to South Korea? Yes.

    Chinese would take Taiwan at a minimum.

    The Chinese don’t actually have the capability to invade Taiwan at this point, although they could probably try and isolate it. Assuming the US cut off all support and ended its defense guarantee, they’d probably just get into a cozier relationship with the mainland government – think Finlandization.

    South Korea would be lost.

    Ha, no. South Korea’s military is smaller but much more advanced and well-trained than North Korea’s. If the Norks were actually crazy enough to attack, the South Koreans would drive them back, at which point it becomes a race to Pyongyang between the South Koreans and the Chinese across the border, since the Chinese know that any unified Korean state is basically a US-friendly state on their borders instead of a client state.

    Chavez would find an excuse to attack Honduras or Columbia for starters.

    He’d have an all-out war on his hands, and not just with Colombia. The Brazilians would not look too fondly on this, and Colombia would presumably still be buying weapons from the US.

    Africa may stay the same or there could be an all out push for control with a far greater outbreak of piracy either way.

    The US basically stayed out of a highly bloody war in central Africa that occurred largely in the late 1990s/early 2000s, and our absence wouldn’t exactly mean much except that the Chinese have more room for deals.

    Russia would take greater actions against it former East Bloc.

    Against the Ukraine and Georgia, maybe. Against Eastern Europe and the rest of Europe? Not really – they’re massive trade partners, and the Russians don’t really have the resources to do a major conflict with Europe.

    The Russians probably couldn’t even occupy Poland at this point if they wanted to, for example.

  23. sam says:

    @Brett

    Assuming the US cut off all support and ended its defense guarantee, they’d probably just get into a cozier relationship with the mainland government – think Finlandization.

    At the very worst, think Hong Kong.

    South Korea would be lost.

    I don’t think for one moment China would allow that.

    Chavez would find an excuse to attack Honduras or Columbia for starters.

    My omnibus reply to Wayne when he listed his parade of horribles: Yeah, so? Besides, if I was Wayne or likeminded, I’d be much more worried about Chavez using Citco’s millions to influence US elections.

    Africa may stay the same or there could be an all out push for control with a far greater outbreak of piracy either way.

    What you said. As for the pirates, that really requires a coordinated multi-lateral approach. No need of us to spend gazillions on defense anticipating a Venezuelan dispruption of the Columbian cocaine trade.

    Russia would take greater actions against it former East Bloc.

    Nyet. For the Russians, it’s the economy, tovarich.

    So basically what I said, Yeah, so?

  24. tom p says:

    Means testing social security is the first step towards gutting it entirely. It would create a situation where people are paying into the program, not benefitting from it, and resenting those that do.

    Gustoph: I agree with you to a point….

    But I have to say that: “It would create a situation where people are paying into the program, not benefitting from it, and resenting those that do.”

    Does this sound familiar?

    Yah… I know… the golden rule: Those with the gold, make the rules.

    And just in case that was not clear enuf for everyone, as Warren Buffet once said: “It is class warfare, and we are winning.”

    In other words, I will feel sorry for those subjected to means testing when I get the same benefit as they for a sewer project so they can put in a new Wal-mart.