Ryan Streeter
Well, that's not exactly what the New York Times "You Fix the Budget" puzzle says, but it does give readers a chance to take a whack at the federal budget in an effort to fix the deficit by 2030.
The interactive tool has been getting quite a bit of play in the blogosphere, coming on the heels of the Bowles-Simpson proposals for cutting the deficit as it did, and it has spilled into mainstream news: Wolf Blitzer covered it on CNN today. Readers have taken it on themselves to start proposing their own fixes.
One of the engineers of the puzzle-gizmo, David Leonhardt, covers its use at the Economix blog. This morning he posted the fix-it plan proposed by Barry Ritholtz of The Big Picture, which I post below. It's a mix of cuts (including to the military), combined with raising retirement ages, pegging Social Security to income, and more. Looking at a list like this gets the juices, and discussion, going much as the Bowles-Simpson proposal has.
More about that below, but let me lay out the main issue that should be at the center of the continuing debate about how to fix the deficit. As James Pinkerton writes today, the Bowles-Simpson plan doesn't account for growth and optimism, and is therefore a static accounting exercise rather than a dynamic one. This is an important point. He mentions Robert Solow's work on technology as an example of the dynamism inherent in how growth works itself out.
Keeping that in mind, here is the Ritholtz list cited above:
Eliminate earmarks
Eliminate farm subsidies
Cut pay of civilian federal workers by 5 percent
Reduce the federal work force by 10 percent
Cut 250,000 government contractors
Make other cuts to the federal government
Cut aid to states by 5 percent
Reduce nuclear arsenal and space spending
Reduce military to pre-Iraq War size
Reduce Navy and Air Force fleets
Cancel or delay some weapons programs
Reduce noncombat military compensation and overhead
Reduce the number of troops in Iraq and Afghanistan to 30,000 by 2013
Increase the Medicare eligibility age to 70
Reduce the tax break for employer-provided health insurance
Raise the Social Security retirement age to 70
Reduce Social Security benefits for those with high incomes
Tighten eligibility for disability
The Lincoln-Kyl proposal
President Obama’s proposal (Investment taxes)
Allow expiration for income above $250,000 a year
Payroll tax: Subject some incomes above $106,000 to tax
Millionaire’s tax on income above $1 million
Eliminate loopholes, reduce rates (the Bowles-Simpson plan)
Bank Tax
So, the question becomes, what type of dynamic model would make some of these kinds of reforms unnecessary? Who is our current generation's Robert Solow (in mind, not politics), who might help us figure out how to factor the impact of "growth and optimism" on the deficit?
The best model is going to have to figure out:
- Which types of tax cuts will result in greater investment, not just consumption?
- And what would the effects of increasing savings among Americans have, especially if that savings were part of plans to help prepare for an increase in retirement and eligibility ages?
Readers can always email me with whoever they think might have the best ideas on this front.
No expansion of Medicare availability to all Americans? What sort of puzzle is this? It seems to be missing a few pieces.
Posted by: American Bystander No More | November 15, 2010 at 07:55 PM