Out of Control Policy Blog

How I Balanced the Budget

The New York Times much talked about interactive budget tool has a lot of short comings: it has limited options, doesn't present arguments for an against each option, and rests upon mistaken assumptions about the effectiveness of tax increases to raise revenues. But it sure is cool.

The very simple to use tool actually does give uneducated taxpayers a sense of what is on the table and how drastic the cuts need to be in order to balance the budget. You can play around with the tool yourself here. While the program isn't perfect, its worth taking a look at. This is how I chose to balance the budget:

Overall: After 2015 my budget cuts will yield a $14 billion surplus; after 2030 there will be a $473 billion surplus. Spending cuts account for 85% of these gains, and tax increases account for 15% of additional gains.



Program Savings by 2015 Savings by 2030
Eliminate earmarks $14 billion $14 billion
Eliminate farm subsidies $14 billion $14 billion
Cut pay of civilian federal workers by 5 percent $14 billion $17 billion
Reduce the federal workforce by 10 percent $12 billion $15 billion
Other cuts to the federal government $30 billion $30 billion
Cut aid to states by 5 percent $29 billion $42 billion
 
Military Spending
Reduce nuclear arsenal and space spending $19 billion $38 billion
Reduce noncombat military compensation and overhead $23 billion $51 billion
Reduce the number of troops in Iraq and Afghanistan to 60,000 by 2015 $51 billion $149 billion
 
Health Care
Enact medical malpractice reform $8 billion $13 billion
Increase the Medicare eligibility age to 70 $8 billion $104 billion
Reduce the tax break for employer-provided health insurance $41 billion $157 billion
Cap Medicare growth starting in 2013 $29 billion $562 billion
 
Social Security
Raise the Social Security retirement age to 70 $13 billion $247 billion
Reduce Social Security benefits for those with high incomes $6 billion $54 billion
Use an alternate measure for inflation than Consumer Price Index $21 billion $82 billion
 
Taxes
Eliminate loopholes, reduce corporate and individual tax rates (Bowles-Simpson plan) $75 billion $175 billion
Reduce mortgage deduction and others for high-income households $25 billion $54 billion
 

There are other cuts that could have been made. I could have favored more taxes and cut less services or lowered entitlement age thresholds. Even cut more defense spending—though the GOP will hang onto that tooth and nail. Overall this seems to be a good pro-growth path given the options NYT put on the table.

Anthony Randazzo is Director of Economic Research


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