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Sunday, November 14, 2010

You Play The Deficit Game

NY Times has a feature up allowing you to pick which options you would like to cut the deficit. Once you are done, it records your choices so you can share them.

Here is my first effort. You will note that I have way overshot for both 2015 and 2030, but that is because the numbers given are not realistic. In fact net savings would be less. And one or two things I picked for political viability; realism has to incorporate political realism.

You try. You criticize. You think about it. There should be a write-in feature because there are options not being examined in the menu.

Update: Thanks to Wacky Hermit, we have a link to the Pajamas Media version, which just shows spending by broad category. I would use both; the PJ version is great because it shows the scale and slope over time changing, but the NYT version gives more specific policy actions.

Further update: Robert Samuelson is consistently writing some of the best and most thoughtful substantive economic analysis out there. His latest is exceptionally good. It is rather sad that the economists who have written on the economy have failed to distinguish between temporary and structural economic issues. The reason why the US is throwing so much stimulus into the economy and failing to get much of a bang for it is that we have underlying structural issues we never address. Read the column.

One of the things that is very irritating about this whole thing is that that the Bowles-Simpson deficit reduction plan and the NYT assumes the growth of spending is going to remain what it is right now. That's a much higher spending growth rate than existed just 24 monthhs ago. Obama has put government spending on steroids. Up 38% in the last 18 months. What's even worse, he has abandoned budgets. They just spend whatever they feel like from their omnibus spending bills.

To go back to 2008 or 2007 levels of government spending and holding the increases to 2% per year for the next five years would put a big dent in the spending problem.

Going for an expansive energy plan, getting the eco-terrorists and food nazis off the backs of businesses, and making pro-business tax policy would go far in growing the tax revenue stream while keeping taxes low.

The reality deniers are hard at it, but we can no longer deny the reality that government has no money and must live within the means of the producers to fund it.
Jimmy - but part of the recent increase in growth rate is because of the demographic shift. That will persist.

Also the B-S plan was forced to assume that the health care reform bill remained in effect, and that will hugely boost net federal spending.

The "savings" in that plan all come from unrealistic cuts in Medicare and thus are mythical.
Pajamas Media has a similar counter, but with different options.
Sorry, better link here.
"Jimmy - but part of the recent increase in growth rate is because of the demographic shift. That will persist."

The demographics forced spending up by 38% in 18 months?

Are we comparing apples and oranges? I'm no expert on actuarial tables but the SS system seems eminently fixable.

The Medicare system. Now that is a problem. Everyone assumes there are no fixes. Yes, there are. It just isn't going to be easy or painless.

However, if Niall Ferguson is correct, we don't have any choice. For his views on the subject go here:

Ferguson believes we are headed for a default on our debt because there is no appetite for taking the fiscal policies required to cure our problem.

It is disgusting to me that so many people are resigned to failure of our system because the gospel of "third rails" has become so entrenched in our society. Did he or anyone else in policy positions pay any attention to the fact that over 60% of the population want government to get smaller and spend less? If they had, it seems to me they would not be throwing up their hands and accepting failure.

End of rant!
Jimmy - we don't have the option to not deal with this. We will be forced to deal with it regardless by Mr. Market, just the way the European PIIGS are going down one after another.

The reason why the American population wants fiscal control is because the American population realizes it can take some pain now or much more pain later.

I utterly disagree that the population will not accept a true budget initiative.

No, the political establishment thinks the voters won't accept it only because they have mentally placed a lot of people out of the firing line, and when the American population accepts the necessary cuts, it demands that everyone take it in the shorts.

That has to include cuts to the state and local government retirees, to Medicare and to a lesser degree, Social Security, and to the retirements and pay of the federal government retirees.

It also should include major cuts for certain types of federal spending that really subsidizes corporations, such as the wind turbine and ethanol programs. We are literally throwing away large amounts of money on things that will never solve our real problem and indeed, make that problem worse.
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