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November 15, 2010

Balancing the Budget by 2015 In an Hour

Using the NYT budget simulator, James Pethouikis gets a trivial deficit by 2015 and a surplus by 2030 with an hour's worth of work.

It took Instapundit 2 hours.

I've been playing with this for a while, and I found it pretty easy to check the boxes. Whether or not there's the will to do this stuff is highly doubtful.

In fact, exercises like this might delay necessary reforms by suggesting it's so easy to accomplish the goal of balancing the budget -- if it's so easy, hey, can't we wait another 15 years for all this stuff?

The stuff that would be considered contentious among conservatives, which I chose to do anyway, included the following:

* Reduce the Number of Navy Fleets and Air Force Wings. This is one of the ones I have the most problem with, because power projection is so important, and sheer numbers do count. But the suggested cuts seemed not all that deep; 286 ships reduced to 230, and two tactical air wings elminated. Actually my preference would be to fudge on this one and do half that.

* Reduce Space Spending and the Nuclear Arsenal. Going from almost 2000 nukes to just over 1000 seems like a fairly painless cut. The surplus nukes seem to only have value as bargaining chips to trade away in exchange for Russia cutting its own stock; the odds of so many of our nukes being taken out in a first strike as to leave us without an apocalyptic retaliatory strike -- with all those nuclear subs at sea -- seems remote.

* Gradually Escalate the Age of Medicare and Social Security Eligibility to 70. Seems like a no-brainer.

* The Lincoln-Kyl Plan for Estate Taxes. To be honest, I've never been on the bandwagon about reducing estate taxes to zero. The only clear advantage to this I can see is that I have heard estimates that mere enforcement of this tax -- with all the lawyering and expert appraisals and so on and so forth -- actually consumes nearly as much as the tax itself collects. I don't know if that's true. If it is true, then this is a bad tax. But I sort of doubt it.

I guess my problem with reducing it to zero is that almost everyone has to pay tax on every dollar received -- and I have trouble excluding this one tax from that general understanding. (Yes, people will say they're double-taxed, once in life and once in death, but that's not true, in the sense that it understates the situation; in fact every dollar received is taxed dozens of times as it's converted from one use or one person to another.)

To me it's a question of which sort of income do I want to tax more, and which do I want to tax less: Do I want to have to tax regular income more to avoid taxing estates? I can't think of an equitable reason or moral reason to justify that; it seems to me, all else being equal, regular wage-type income should be more privileged than inherited wealth, not less.

Ending the tax for all estates smaller than $5 million sounds reasonable. If not, hey, $8 million. But that's just me.

A friend of mine says he likes this particular tax because it's some sort of impediment to a permanent aristocracy. I don't know if I buy that but I can't dismiss it out of hand.

* Eliminate Loopholes But Reduce Rates Slightly. This actually would be a net tax increase because the value of the loopholes closed would be a bit higher than the value of the reduced general rates. But as a general proposition, I'm in favor of lower rates and reduced loopholes and shelters, which tend to distort economic behavior and furthermore tends to divert a lot of wealth into the tax-avoidance industry, which doesn't actually produce anything.

* Reduce Mortgage Interest Deduction By Converting to Credit. The mortgage interest deduction is supposed to be an encouragement to home ownership. This change would apparently keep the deduction, but make it less valuable for the very wealthy. Which is fine, by me, because the wealthy are going to buy homes anyway, so why subsidize an activity that is already 99% guaranteed?

At any rate, my final numbers put me in the "RINO" category of 86% reduction through spending cuts and 14% through increased taxes; on the plus side, I'm so over the mark for closing the budget gap I can play around with changes (like restoring weapons programs delays, un-cutting the size of the Navy and Airforce, only escalating Medicaid and SS eligibility to 68 instead of 70) and still remain balanced.



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posted by Ace at 02:46 PM

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