Friday, December 21, 2012

Solving the Deficit

When given a choice of fixed options to reduce the federal deficit to a sustainable level, most Americans are willing to accept higher taxes, less domestic and military spending losing the state and local tax deduction and even a carbon tax, according to a poll reported in Slate. The poll features an interactive menu of policy options totaling $2,082 billion.The user is tasked to select options totaling $900 billion to reduce the deficit.  Policies individually chosen by 53 percent or more respondents total $943 billion and do not, include reducing Medicare and Social Security benefits.  Those options garnered 34 and 37 percent respectively. 

Of course, the devil is in the details but the interactive menu provides some good thumbnail information, enough to make you think.  I took the poll and found $514 billion right off by choosing cuts in military spending, higher tax rates for incomes above $250K and a carbon tax.  The carbon tax was chosen by 56 percent of the respondents.  It makes perfect sense to tax something we want to discourage; given climate change we need to discourage carbon.

I can get to $731 billion by reducing domestic spending 1 percent a year (same as military) but that leaves me $269 billion short.  Frankly, I think I could get more savings out of the military.  Department of Defense financial management has been reported by the Government Accountability Office as high-risk area every year since GAO began identifying high risks in 1995.  For this exercise, if I get those additional savings, I would use them to offset cuts to the domestic programs so I'm still short.

Choosing a national sales tax would add $406 billion to my total and allow me to reduce those domestic program cuts big time.  Fifty percent of the poll respondents chose the sales tax.  I'm not inclined to.  Sales taxes are regressive and have traditionally been used by state and local government.  The other big money option is tax rate increases for all.  That would add $336 billion and give me some margin.  I don't want that option either.

My next choices would be to eliminate the deductions for home mortgage interest and state and local taxes.   Those two options put me at $943 billion. I would consider those options only as part of a larger review of all tax deductions.  Other deductions could well have less social and economic utility and could be much better candidates for elimination.  But as long as I am willing to accept a reduction in deductions, I can legitimately claim the savings.

So that's how I would solve the deficit.  It's pretty much in line with what most Americans want.  Maybe if Congress would listen to Americans and not corporate lobbyists, the deficit would be no fucking big deal.

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