Tuesday, November 23, 2010

The Deficit Game

A few weeks ago, MaxedOutMama linked to a New York Times interactive graphic allowing you to eliminate the deficit. The page provides options for both spending cuts and tax hikes.

M_O_M's suggested approach is here; she proposes a mix of 68 percent spending reductions plus 32 percent tax increases. My similar suggestion is here; I chose to rely 79 percent on spending cuts, 21 percent on higher taxes.

The biggest differences?: foreign aid (M_O_M would cut in half, I wouldn't); farm subsidies (she retains, I eliminate); state aid (she retains, I cut by 5 percent); troops in Afghanistan and Iraq (she would reduce to 60,000 by 2015, I retain); Social Security retirement age (she retains, I raise to 68); taxes (she supports President Obama's proposals on estate tax and income tax increases for >$200k earners, I oppose both); and mortgage interest deduction for high earners (she eliminates, I retain). Both M_O_M's and my "plans" cover the shortfall in 2015 as well as 2030 although, as she notes, "the numbers given are not realistic. In fact net savings would be less."

What's your suggestion? Try your hand here. Or try the Pajamas Media version here. And the Economist magazine compares deficit reduction plans here.


Anonymous said...

Roy says:
None of the models factor in what has happened every time in the past when tax rates got reduced: tax revenue went up.

Carl said...

Agreed, Roy--static models like the Times' fail to capture the revenue-enhancing and growth effects of tax cuts.

MaxedOutMama said...

I like Carl's solutions better than mine, and I believe his solution would lead to an objectively better result. I do not believe it would be passed, however.

Mine were chosen with political plausibility in mind.

For me the point of this exercise is that we can balance the budget. We find the task so daunting because we have never even tried.

Balancing the budget would lead to a much more prosperous future. The earlier we start, the less negative impact it will have.

So why haven't we done anything?

Because DC is screamingly dysfunctional.

Assistant Village Idiot said...

Carl, your percentages are similar to Cameron's in the UK. He has agreed to tax increases of one pound for every four pounds of budget cuts - with the proviso that the cutters go first, not just with proposals, but with passed legislation.

I would consider the tax increase to be paying for my entertainment at that point. Beats going to a dozen movies or operas.