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How I Fixed the Deficit

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The most fun I've had online since... well, let's not get into that, but I thoroughly enjoyed the interactive graphic in Sunday's New York Times on fixing the deficit. David Leonhardt et al chopped up the projected 2030 shortfall of $1.345 trillion into $5 billion squares and offered a bunch of spending cuts and tax changes to fill them all in.

It's necessarily oversimplified, since both spending and taxes, as the authors note, have "potential effects on economic growth." But it's a lot more serious than most anything I've heard (including from the president's commission, for reasons detailed here).

You can see the choices I made, and here's why (figures in parenthesis are billions of dollars saved; where two numbers are noted, they represent savings in 2015 and 2030):

Eliminate farm subsidies (14). This is pretty much all corporate welfare, which is why it should appeal to liberals, and it's anti-free market, so liberals can rightly call the Republican Congressmembers from farm states hypocrites when they object. Not that four Democrats have the cajones.

Reduce nuclear arsenal and space spending (19/38). Diminishing by half the number of the 2000 largest cities on earth that we can instantly vaporize is unlikely to result in the deaths of any Americans. And SDI has never passed a legitimate test.

Reduce Navy and Air Force fleets (19/24). We have a larger military than the next 14 militaries combined. Hey Denmark--Here's your reward for having health care and financial systems that make sense: You get to start carrying your own weight.

Reduce the number of troops in Iraq and Afghanistan to 30k by 2013 (86/169). As Ted Rall pithily states, "We're losing anyway."

Enact medical malpractice reform (8/13). This is the first thing Republicans always mention when asked what they'd do differently than "ObamaCare." Torts are like 1% of health care spending, but whatever -- toss the dogs a bone.

Exempt the first $1m of estates from tax, vary the rate above that (50/104). The Times calls a $5m exemption "moderate" and a $3.5m exemption "more aggressive." I would flip those characterizations, but anyway, this radical socialist redistribution of wealth... is what we had under Clinton, with a Republican-majority Congress. The classic whine about people losing their family farms to the estate tax, it turns out, is a complete fabrication; both the Farm Bureau and a U. of Iowa professor have looked, and found not a single such occurrence.

Return investment taxes to Clinton-era levels (32/46). The capital gains tax for low-income people would be half what it is for everyone else, which encourages investment and therefore saving, and for the rest of us it'd still be less than what it was under that reviled socialist, Ronald Reagan. Bush 43 lowered the dividend tax rate with the excuse that it discouraged investment, yet somehow the Dow rose 371% between in the 13 years before than, and 0% the 10 following. So much for that idea.

Allow Bush tax cuts to expire for those with incomes over $250k. (54/115). We were told, when these cuts were enacted, that doing so would encourage hiring. That worked out real well, huh?

Raise the ceiling on the Social Security payroll tax (50/100). Income over $106k isn't subject to Social Security tax? Makes no sense.

Millionaire's tax (50/95). If you make a million dollars in a year, you can certainly afford to pay a nickel per dollar on every dollar you make above a mil. You're unlikely to be a small-business owner with ducats like that, so the effect on hiring would be basically nil.

Eliminate loopholes, reduce tax rates (less than the deficit commission recommends) (136/315). Once you get the budget under control, you can see if these reductions resulted in greater revenue--a Laffer curve postulation that has so far proven as valuable as what my wife scrapes off her boots after mucking out the stables. But I'm cool with giving the rightists their chance, and if it works, reward them with further cuts (i.e., what the commission recommends). Meantime, we need the money.

Reduce mortgage-interest deduction (25/54). The Times doesn't get into specifics, but how about no deduction over $500k of mortgage? If you're putting down 20%, that gets you a $600k house, which except in a few markets is gonna be pretty kick-ass. If you're putting down more than 20% and financing more than $500k, you don't need the deduction (keep in mind you can still deduct interest on the value of the mortgage up to $500k). If you're putting down less than 20% and financing more than $500k, you are a dumb-ass and the rest of us need not finance your dumb-ass-i-tude.

Carbon tax (40/71). Negative externalities like carbon emissions distort the free market; making polluters pay is the only way they'll stop; the cost of not dealing with climate change will be much greater than a carbon tax; it will encourage the development of a green economy. No brainer.

Bank tax (73/103). Their greed and stupidity has caused everyone but them to suffer. Make them pay.

There! That's a $288b surplus in 2015 and a $27b surplus in 2030. And we didn't even get into raising the retirement age for white-collar jobs; actually doing something about runaway costs in the health care system; reducing Medicare benefits for the very rich (or how about this: cut off the wealthy gout-sufferers who drink, smoke, and eat red meat all their lives); or making hedge fundies pay income tax instead of capital gains tax (since their income is not, in fact, capital gains).

Here's what else we didn't get into: I didn't touch the third rails -- Medicare and Social Security. Everyone talks like these are the biggest problems, but if we get over the idea that we have to have the world's most expensive military by a factor of seven, and that how we treat the richest among us should revert to the way we did things in the 1890s, solving the budget is not so terrible.

But good luck convincing either major party of that.

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