Show of hands, please: Do you think you can do a better job with the federal budget than our leaders in Washington?
The exercise gives you a goal–getting the federal debt down to 60% of GDP by the end of 2018–and a lengthy menu of policy options that you can use to get there.
How tough is this? Pretty hard. The CRFB’s baseline has the debt at 66% of GDP in 2018, implying that we need $1.3 trillion in spending cuts and tax increases to hit the 60% target. But that’s assuming that all the 2001 and 2003 tax cuts expire at the end of the year and that discretionary spending will grow only at the rate of inflation over the next decade.
As a political matter, a more plausible baseline might be to assume that the tax cuts get extended except for high-income folks and that Congress enacts the President’s proposed levels of discretionary spending. In that case, the debt would be 82% of GDP in 2018. And you, the beneficent budget dictator, would have to find $4.6 trillion in spending cuts and tax increases.
Just for fun, here’s one way you might get there:
- Reduce the number of troops in Iraq and Afghanistan to 30,000 by 2013
- Make a variety of other defense spending reductions
- Raise the Social Security normal retirement age to 68
- Gradually reduce scheduled Social Security benefits through 2080
- Use an alternate (i.e., lower) measure of inflation for Social Security COLAs
- Include all new state and local workers in Social Security
- Increase Medicare cost-sharing and premiums
- Reduce spending on graduate medical education through Medicare
- Enact medical malpractice reform
- Increase the Medicare eligibility age to 67
- Reduce Medicaid spending to higher-income states
- Reduce farm subsidies
- Cut assorted other spending (is anyone not going to cut “certain outdated programs”?)
- Enact a carbon tax
- Increase the gas tax by 10 cents [I was surprised CRFB didn't have an option to raise it more]
- Raise the Social Security tax cap to cover 90% of earnings
- Index the tax code to an alternate (i.e., lower) measure of inflation
- Sell government assets
- Reduce the tax “gap”
- Replace the mortgage interest deduction with a flat credit
- Curtail the state and local tax deduction
- Replace the exclusion for employer-provided health insurance with a flat credit
- Limit itemized deductions for taxpayers with high incomes
- Eliminate subsidies for biofuels
And that doesn’t leave room for any spending increases or tax reductions that you might want.
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