Saturday, May 22, 2010

Unbusting the Budget
Here's a cool (policy nerd division) web offering from the Committee for a Responsible Federal Budget where you can try to stabilize the U.S. Debt by 2018. The task is to get the debt to 60 percent of projected GDP by that year, the point at which things are likely sustainable "without huge costs to [the] standard of living at a minimum and most likely a severe crisis." That target would be down considerably from the 85 percent it's now projected to be by that time (under the same set of projections, debt will fully equal GDP by 2022 and be double the GDP by 2038... the year I'd be eligible to retire under current law, as it happens). The app takes you through various pages that represent parts of the federal budget, including military and foreign aid expenses; current entitlements; the newly passed health care law (which is a debt reducer); and a range of discretionary categories of expenditure.

I'm happy to say that I managed to get the debt down to 59 percent of GDP by 2018--while lowering the corporate tax rate from 35 to 30 percent, passing an additional $210 billion Jobs Bill, making several tax credits (child tax, research and development) permanent, and significantly increasing funding for public transit. And I didn't go out of my way to soak the rich; no surcharge on millionaires, for example, or shifting of the home mortgage deduction to a capped credit, both of which were options. That said, every ox was gored at least a little: significant drawdown of troops in Iraq and Afghanistan, cancellation of various weapons systems, closing tax loopholes, passing of a carbon tax or cap and trade regime, limiting how much high earners can itemize deductions and deduction state/local taxes; but also passing of medical malpractice reform, higher Medicare premiums and switch to a voucher system, selling certain government assets, raising the eligibility ages for Social Security and Medicare (as well as the cap on income calculated for SS and broadening the universe of workers required to pay in, plus other changes to Medicare shifting cost burden to beneficiaries), reductions of Food Stamp spending to pre-stimulus levels, passing a 5 percent Value-Added Tax with partial rebate, cutting earmarks by half.

I did give my personal preferences some rein--otherwise, what's the point? (Don't answer that.) No cuts to federal education spending or TANF, etc. Anything that seemed likely to bolster the country's human capital, I left alone or actually spent more on, figuring that some of those things are revenue-positive in a longer time horizon than this exercise considered. But in an actual governance/bargaining situation, of course, I'd compromise on much of that; take for instance how Ross Douthat got to 60 percent. He and I had about half overlap; we probably could figured out a set of changes we both could live with in twenty minutes, if need be.

The obvious lesson: our politics, not our policies, are at the core of the long-term budget problem. The seniors lobby--which isn't even rational, since proposed changes wouldn't affect current beneficiaries--defense contractors, trial lawyers, Big Ag, fossil fuel companies and others stand in the way of putting our budget on a sustainable path. I wonder if the answer for well-intentioned groups like the Peterson-Pew Commission, which sponsored the budget app, isn't really political process reform, curtailing the power of lobbies to put their private interests ahead of the public interest. Easier said than done, of course, but taking on that fight before trying to fix the budget makes a lot more sense than attempting to impose the needed course corrections on a political field that's now tilted impossibly toward groups with so much invested in the status quo.

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