Sunday, June 27, 2010

PS427: Stabilize the National Debt Yourself

As we are talking about budget choices at both the state and federal levels, here is a nifty exercise in seeing what you care to cut to get the federal debt under control.

Ezra Klein writes about some of the issues here.

And more fun, the Committee for a Responsible Federal Budget has the budget simulation here.

See what it takes you to get to 60% of GDP.

Discuss: What choices did you make?

What political obstacles would arise in getting your choices passed by Congress?

Who do you think should pay for reducing the deficit? The rich through higher taxes, the poor through reduced services, the elderly through Medicare and Social Security cuts, the middle class by removing income tax deductions for homes and state taxes, the military by ending defense spending as we know it? You choose, but explain your choices.


  1. In my quest to reduce the national deficit, I was able to reduce it to 58% of GDP in 2018. In order to lower the dept that much, lots of cuts need to be made. Many of the cuts I choose would never be able to be enacted due to irreconcilable differences of the two parties. The two largest cuts that I chose to make were reducing troops in Iraq and Afghanistan to 30,000 by 2013 with a measly price-tag of $740 billion, and Enacting a 5% VAT With Partial Rebate, price-tag of $630 billion. I have a hard time believing that both sides of the aisle would be able to come together to agree upon such a large decrease in shops in Iraq and Afghanistan. As for the national sales tax increase I think those on the right would be for it since money would be used to other tax cuts (with the right always likes). Another significant change I chose was enacting cap and trade. Other changes I chose (mainly not large increases) were not cutting any health care or social services with the exemption of increasing the retirement age. Some others that I chose are eliminating outdating programs and cutting earmarks, but those are easier said than done.

    From my political view cuts to reduce the deficit should not come from social programs or education, but in tax increase on the rich and reduction in military spending. If the US was not involved in two countries oversees militarily more money would be available to reduce the deficit. Maybe even if that money was not taken would could increase funding in education.

  2. I was able to reduce the national debt to 60% of GDP in 2018 in this exercise. I also made a lot of cuts that would be difficult to enact due to the controversy between both sides of the aisle such as cutting certain aspects of the military. I chose to reverse the Grow the Army initiative since we have a large number of troops and we might even be cutting back the amount of troops we have overseas. I also decided to enact a 5% VAT with partial rebate. While this would create a national sales tax, it would cut back on other taxes while reducing national debt at the same time. I also decided to increase the gas tax by 10 cents per gallon. Even though there are many who would be a little disgruntled about it, it would be a great source of revenue since basically everyone uses on it a daily basis.

    Another debt deduction that I included was to include all new state and local workers in the social security program. Many of them do not contribute to social security and I think that they should also contribute to this program to help lower our debt. Some of the other things I did were mainly to tax the rich and raise medicare premiums to 35%. I did not cut back on educational programs because I believe they are important for our citizens to succeed. I also did not really cut back much on social welfare spending because our nation needs to protect those that are less fortunate and the most vulnerable. I also to chose to cut earmarks in half as well as eliminating outdated programs since they are eating up money that we don't need to spend on them.

  3. I was also able to reduce the debt to 58% of GDP by 2018 but I believe in a real life situation, it would be difficult to get both parties to agree to the reductions necessary. I believe that providing social welfare programs is one of the main roles of government so I tried to cut or reduce as few of those as possible. I supported education for many reasons, one of which being that it would be difficult for either party to argue against investing in it. While I did cut some military spending I also increased benefits for veterans.
    I eliminated outdated programs and supported improving tax collection though I acknowledge the actual implementation could be tedious and difficult. I also supported the carbon tax or cap-and-trade not only because it would put us in line with other countries, but because it would generate a surprising amount of revenue. I recognize the importance of earmarks, both for re-election and getting money to communities that may otherwise be overlooked on a federal level, but in the end cut those as well because they have become too costly.

  4. I was also able to reduce the debt to 58% of GDP. I tried to put as much responsibility on to the rich as possible, with minimal impact on the poor and middle class, by reducing lower rate cuts by half and letting upper-income cuts expire. This would largely be opposed by members of Congress whose constituents were largely wealthy individuals.

    I cut military spending by reducing troops to 60,000 by 2015 and reducing funding for ship building, as I am taking a foreign policy class and just read about how, while in the past technological innovations made our ships and planes outdated fairly quickly, this is no longer the case. I also reduced the Grow the Army Initiative. This would clearly be opposed by the military. If the military-industrial complex tells us anything, the amount of funding I chose to cut from the military would never realistically pass Congress.

    I chose to cut foreign aid in half; as important as foreign aid is, we're in no position to continue our current practices when our own economy is in shambles.

    I cut about 220 billion worth of domestic spending. While I tried to cut programs that would have the least amount of impact, my selections were somewhat arbitrary. I raised the retirement age to 68; people are living longer and this would allow more accrual of social security. I reduced spousal benefits as well, and included all new state and local workers in contributing to social security.

    My health care cuts were somewhat arbitrary, mostly picking things that I understood to have a minimal impact on those who need insurance the most.

    I chose to eliminate outdated programs and cut earmark spending in half, which seemed like obvious choices.

    The earmark portion would obviously be difficult to pass through Congress. Reality would likely preclude this from happening. At the same time, I believe that in a period of crisis, our elected officials should focus less on the longevity of their career and more on the public good. When cuts need to come from somewhere, those in charge of our well-being should take some responsibility.
    This fits in to the broader picture of whether my decisions would pass through Congress. All of the proposed cuts would affect someone, and all of those affected would urge their representatives to oppose them. While it is absolutely the job of those in Congress to represent the wishes of their constituents, they need to take their long term well-being into account in addition to what will affect them today.

  5. I thought this was a great website and really enjoyed reading about how difficult reducing the deficit would be and reading about some of the tough choices policy makers are faced with. A good portion of my choices came through cutting the defense program and foreign aid. The hardest part of the exercise was realizing that every decision was a double edged sword. Cutting troop levels and reducing defense spending was easy with the click of the mouse, but a much more complex problem. America’s safety is the top priority to the majority of citizens and reducing troop levels is easier said than done. The reality is that our past decisions cannot be reversed in one swoosh of a pen and that cutting troops levels and defense often results in a reduced sense of safety. I will say that foreign aid has been a hotly debated subject for years now and that in the face of this economic collapse one way to reduce the deficit can be foreign aid. I recently read Dambisa Moyo’s book, Dead Aid, about the trouble with foreign aid to Africa and I think she’s right in that assuming foreign aid does so much good is dangerous.
    The other part that I found most interesting in this exercise would be the political obstacles that would arise to the choices. One point I noticed that would affect Congress passing some of these decisions is that many decisions help a certain group of people at the expense of a different group. Whether it be helping the old at the expense of the young, helping the poor at the expense of the rich, helping the disabled at the expense of the abled, every decision would have a large group of support and objection. This is the heart of the political obstacles that would arise in getting these choices passed by Congress. While liberals see the benefits to one group, conservatives see the expense of the other group.
    I think that choosing who should pay for reducing the deficit is a very difficult question without a right or wrong answer. The best way, in my opinion, would be to spread out the cost equally among every group of people equally. While higher tax cuts will benefit the poor, another cut should benefit the rich. This is easier said than done, and I’m not sure would even be possible but at least in theory, this would be how I would reduce the deficit. Either way, this activity is a great way to learn about the complicated process of reducing the deficit.

  6. Diffuse benefits, concentrated costs; many of the cuts we see here would unfortunately never pass exactly because of this maxim. The local and state centric views of many members of Congress would interfere with many projects.

  7. I was able to reduce the debt to 60% of the GDP but not without lots of thought and difficulty. I enjoyed this exersize but it was definitely difficult to make all these cuts and I was doing this alone, it would be near impossible to do this with a group of people having many different views. I cut foreign aid and military spending as well as supporting the cap-and-trade program. It was difficult to pick and choose what exactly to cut and what to maintain. It was interesting seeing how much of a difference certain things made in the overall budget. I was thinking that perhaps cutting spending on one thing would make the percentage go down, but i was mistaken. You need a combination of cuts to make the debt go down a few percentage points and this combination is not going to be an easy one to come up with.


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