Thursday, November 18, 2010

Playing the New Game of "Deficit Buster"

Posted By on Thu, Nov 18, 2010 at 9:42 PM

Think you know how to fix the federal budget deficit? The New York Times has posted an interactive tool that lets you take a shot at it.

The Times gives you 40 different options to play around with, including spending cuts in areas such as the federal government payroll, the military, Social Security and Medicare, and revenue increases of various types.

With about 15 minutes of tinkering I was able to wipe out the deficits (both the short-term one of $418 billion by 2015 and the long-term one of $1.345 trillion by 2030) without cutting Medicare or raising the Social Security retirement age, although I did opt for reducing the rate at which Social Security benefits would increase with inflation for upper-income recipients. I also avoided cutting the federal workforce or the pay of federal workers, but agreed to eliminate earmarks and farm subsidies, saving $14 billion on each.

The big long-term savings came from cutting $180 billion from defense spending and saving another $169 billion by sharply reducing troop levels in Afghanistan and Iraq. (The option of pulling all the troops out, unfortunately, wasn’t offered.)

On the revenue side, I went for a bundle of tax increases totaling $724 billion. These included returning the estate tax and capital gains and dividends tax to the levels that existed during Bill Clinton’s administration (raising $150 billion), allowing the Bush-era tax cuts for people making over $250,000 a year to expire but keeping the cuts for taxpayers below that level ($115 billion), raising the ceiling on payroll taxes for Social Security and Medicare ($100 billion), and levying a carbon tax ($71 billion), a tax on big banks that make risky investments ($193 billion) and a 5.4% surtax on incomes above $1 million a year ($95 billion).

Politically, of course, enacting even a small portion of these tax increases will be impossible, especially with the Republican / Tea Party gang in control of the House. But crunching the numbers was a useful exercise anyway, if only to demonstrate that the deficit can pretty easily be brought under control without making draconian cuts in programs that matter to ordinary Americans or imposing tax increases that would cause pain to anybody who’s not a multimillionaire or billionaire.

The interactive graphic also demonstrates that it’s impossible to make even a small dent in the deficit without cutting defense spending, Social Security and Medicare or raising any taxes – so any politician who tells you he can do it is blowing smoke.

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