Monday, May 23, 2011

Fixing the deficit (for grown-ups)

Just as a follow-up, I re-did the New York Times' "You Fix the Budget" interactive puzzle this morning, just to re-remind myself of how to be responsible. Here are my choices: I have a couple of other ideas that would likely take care of the rest of the long-term issue as well.

Domestic Programs/Foreign Aid

- Cut foreign aid in half
- Eliminate farm subsidies
- Reduce the number of contractors

This first batch of cuts isn't huge, but it sets a tone. Virtually no industry in this country should be subsidized, we don't need to spend a lot of money bribing other nations, and we also shouldn't employ contractors to do what we can do with employees. I'd like to make some other cuts here that aren't listed as options, too.

Military

- Reduce nuclear arsenal and space spending
- Reduce military to pre-Iraq War size, reduce European and Asian troops
- Reduce Navy and Air Force fleets
- Cancel or delay weapons programs
- Reduce noncombat military compensation and overhead
- Cut troops in Iraq and Afghanistan to 30,000 by 2013

These seem like enormous cuts, but it's time to get out of our entanglements overseas. We have by far the biggest, most powerful, and most expensive military on Earth. We don't need that much. And we've effectively eliminated Al-Qaeda as a major threat, we don't need to worry nearly so much about the remaining Taliban.

Health Care

- Enact medical malpractice reform
- Increase Medicare eligibility age to 68

Malpractice reform is a good idea in general and that area of law is abuse-prone. It won't make a big difference by itself but conservatives want it badly and it's good to give it to them. Barring single-payer insurance, we should up the Medicare eligibility as long as the present system still stands.

Social Security

- Raise the Social Security retirement age to 68
- Reduce Social Security benefits for those with high incomes
- Tighten eligibility for disability

Again, people live and work longer, so delaying full benefits another year is fine. Cutting benefits a little for high-income people is harmless, and making it more difficult to claim disability is also a win. We've had a lot of creep in disability over the years.

Existing Taxes

- Estate Taxes: President Obama's proposal
- Investment Taxes: Return rates to Clinton-era levels
- Bush Tax Cuts: Allow expiration for income above $250,000 a year
- Payroll tax: Subject some incomes above $106,000 to tax

All reasonable ways to get revenue while still keeping taxes lower than they were early last decade. I'd go further on the payroll tax, though, and apply it to all income instead of the ceiling it'd be targeted for here.

New Taxes

- Eliminate loopholes, but keep taxes slightly higher
- Reduce mortgage deduction and others for high-income households

Yes, I'd "soak the rich" comparatively speaking. Film at 11.

Altogether, my proposal based on the puzzle takes us from a $418 billion expected deficit in 2015 to a $604 billion surplus, and reduces the structural deficit by 2030 from $1.245 trillion to $62 billion. On top of that, I'd propose a massive nationalization of basic health care, with private insurers free to sell supplemental and enhanced coverage on top of that. That would likely clear up the remainder of the long-term deficit and free up money that currently is lost to health care inefficiency.

What's your plan? I know what most of the Salem News commenters would say, and it's not pretty.

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