Think balancing the federal budget is easy? Give it a shot.

by Kevin on May 30, 2008

We talk about balancing our personal budgets all the time. The federal budget is a huge beast that currently is running significant deficits. I think this is wrong and based off of dumb decisions by our Congress. I wish I could have my shot at fixing the budget.

Thanks to NPR’s Marketplace (one of the best radio shows around), you can take your shot at balancing the federal budget.

When you start, debt is 37.7% of GDP. Government is 20% of GDP. There is a $343 billion deficit. Here’s what I made changes to (numbers are savings over 10 years as stated by the game):

  • Cut military spending by 10% (Save $541 billion). I don’t buy the fact that cutting 10% is going to endanger us to a list of perils. Nevermind the fact that terrorists typically are not fought with aircraft carriers and submarines… more like M-16s and men on the ground. Oh, and diplomacy.
  • Bring troops home soon (Save $391 billion). I bet that is a conservative estimate on what we would save. We shouldn’t have gone in the first place, many of them don’t want us there. I’m all for peacing out.
  • Cut foreign aid (Save $218 billion). May make me seem like a heartless jerk, but we have yet to solve poverty issues by throwing money at the problem. I’ve also read reports that in some parts of Africa, they don’t want our aid.
  • Increase funding for arts in schools (Additional cost of $0.53 billion). The arts have consistently been cut. This is more of a state issue for me, but I am definitely pro-arts. My wife is a music teacher, and I sang all throughout my schooling.
  • Increase EPA budget by 50% (Additional cost $38 billion). I think the reasoning involving this card is solid. The agency is had additional responsibilities thrown on it, and funding has remained flat for a decade.
  • Clean up nuclear waste sites (Additional cost $16 billion). $16 billion is small peas and would have a significant environmental impact.
  • Reform and duce farm subsidies (Save $10 billion). My family might not like this one, my grandparents were farmers. However, a significant chunk of farm subsidies goes to mega corporations that don’t really need them. I would be all for reforming the system to truly help out the family farmer.
  • Double funds for wildlife refuges (Add’l cost $5 billion). Again, $5 billion is small potatoes and is a pro-environment move.
  • Protect more endangered species (Add’l cost $1 billion). Small potatoes, significant impact.
  • Cut discretionary spending by all government agencies 5% (Save $265 billion). I am aiming for a small government. Cut the fat.
  • Eliminate pork barrel projects completely (Save $242 billion). This one really burns me up. We didn’t elect Congress to make a specific Congressman’s state better. Not a federal issue — get rid of it all.
  • Increase mass transit funding (Add’l cost $33 billion). Our transit systems suck for a majority of the United States. Enormous cities have decent systems, but nothing near what many Europeans enjoy. Imagine not having to own a car…
  • Simplify and raise Medicare fees (Save $31 billion). Might not be popular, but simplification might help reduce costs further down the line (fewer people needed to answer the phone to answer questions, etc.). Healthcare is one of the biggest issues and I don’t claim to be an expert.
  • Repeal Bush tax cuts and tax the rich (Save $2,954 billion). That’s huge! I believe in everyone being taxed the same — no caps, etc. — and this is as close as I could come.
  • Link AMT to inflation (Add’l cost $1,323 billion). AMT was originally designed to target the super rich and is now hitting some of the upper middle class. It should have been indexed to inflation from the beginning. Suck it up, lose the tax revenue today.
  • Cap and limit greenhouse gases (Add’l revenue of $1,990 billion). Environmental move and additional tax revenue? Gravy.
  • Increase social security taxes for the wealthy (Add’l revenue of $536 billion). One of the things that really annoys me is that social security tax is only taken out of the first $102,000 worth of earnings. So for the people out there earnings millions of dollars a year, they are taxed as much as the guy earning $102,000 per year. That’s ridiculous. The plan in the game raises it to $180,000… if it were up to me, I’d remove the cap completely.
  • Raise tobacco prices (Add’l revenue of $54 billion). Smoking is stupid and increases health care costs.
  • Tax private equity and hedge fund managers (Add’l revenue $26 billion). As far as I am concerned this is just closing a tax loop hole. These guys earn millions of dollars as income, but qualify it as a “dividends” so it is taxed at a lower rate.
  • End breaks for big oil (Add’l revenue $14 billion). Tell me again why huge oil companies earning billions of dollars a year in profit should get tax breaks? Sounds like they don’t need it to me.

My Budget Results:

  • Debt reduces to just 6.4% of GDP.
  • $743 billion budget surplus, an overall swing of $1,086 billion.
  • Government size reduced to 17.8% of GDP.
  • I delayed the budget going bust from 2033 to 2068.

What happened with your budget?

{ 3 trackbacks }

Carnival of Debt Reduction #143 — The History of Debt | Moolanomy
June 9, 2008 at 7:03 am
Budget Hero: Take a crack at balancing the federal budget - Smart Spending
June 12, 2008 at 3:50 pm
Grab your Cape, Be a Budget Hero « PIC Current
August 13, 2008 at 7:53 am

{ 6 comments }

Fiscal Musings May 30, 2008 at 8:58 am

I can’t agree with all the additional spending on “environmental issues”. If fat is to be cut then why spend more on just the latest “en vogue issue”?

I’m also not a fan of raising the capital gains tax rates. Even if you just own index funds, the fund buys stocks, and stock increases are capital gains.

Kevin May 30, 2008 at 10:26 am

@Fiscal: Well if I truly had my way we would wipe the books away and start the law system over. But I didn’t have that option… 🙂

What it really illustrates to me is that there are really four things that you can adjust to have a significant impact on the budget. Everything else is small potatoes. Those four are defense, healthcare, social security, and the national debt. Everything is just really small stuff.

Philip Robert May 30, 2008 at 1:53 pm

Kevin, are you nuts?

Repeal Bush tax cuts and tax the rich (Save $2,954 billion). That’s huge! I believe in everyone being taxed the same — no caps, etc. — and this is as close as I could come.

According to the Congressional Budget Office, the top 1% of households currently pay 27.6 percent of all federal taxes. More than they paid during the last year of Bill Clinton’s administration before the Bush Tax cuts.

Placing more of a tax burden upon the wealthy will only encourage them to become more creative in finding ways to reduce their income so as to avoid paying increased taxes. The wealthy also have the option of moving income offshore avoiding taxes completely.

If you want to see this country’s economy flourish the best thing you can do is to reduce taxes over all. When people have the opportunity to keep more of their money they are encouraged to do more with their money. As the economy grows so does the income in real dollars of the U.S. Government.

We get caught up too much with percentages and statistics. Raise taxes by a percentage point and the real dollars collected fall. Reduce taxes by a percentage point and real dollars increase.

Increase social security taxes for the wealthy (Add’l revenue of $536 billion). One of the things that really annoys me is that social security tax is only taken out of the first $102,000 worth of earnings. So for the people out there earnings millions of dollars a year, they are taxed as much as the guy earning $102,000 per year. That’s ridiculous. The plan in the game raises it to $180,000… if it were up to me, I’d remove the cap completely.

The Government is already misbehaving with social security. One of the reasons that the social security tax is capped for the wealthy is that they have provided for their own retirement. Something that any working stiff can do (as you well know).

What you’re proposing is socialism, and in my opinion we’ve already got too much of that in this country. The solutions are simple when individuals accept responsibility for their actions and their life. Too many people in this country believe that the government should take care of them. What? they need somebody to change their diaper? This country was built by people who believed that they were responsible for taking care of their life and that the government was responsible for building and protecting the infra-structure so that would be possible.

There are many areas in the U.S. budget where we are spending too much money. You’ve got some good ideas there. Increasing taxes on anybody is not the answer.

Kevin May 30, 2008 at 2:09 pm

@Philip: You make excellent points and I’m not going to try and refute them. This is what I would do in this game. If it were up to me, as I said before, we would start over. Completely.

I am aware of the Laffer curve. It’s kind of hard to tell where you are on the Laffer curve. If you are past a certain point, your point is true where you reduce taxes and revenues increase. However, if you are on the other side of the slope then increasing taxes increases revenue, too. (For example, Sweden has up to a 70% tax rate and is definitely at the point where less tax rate = more revenue, but even that is not assured).

If it were really up to me, we would have government for defense (of our actually shores, not across the ocean), maintaining our infrastructure, and regulating specific industries like power and oil. Let the states control the rest.

Philip Robert May 31, 2008 at 12:49 am

Thanks Kevin. My worry is that government continues to become bigger and more controlling. More government bureaucrats believing they have the right to tell us how we should live our lives. The way things are now we are just enabling our government with its fiscal misbehavior. As great as America is, it is sad to see the direction we’re heading.

Ryan October 13, 2008 at 6:51 pm

While I don’t agree with every part of your plan the overall move to create a smaller government with a fair tax system makes a lot of since to me.

Government Subsidies in this country are egregious, We supplement things like farming that seem to be doing great on their own. As if that wasn’t bad enough we are giving these subsidized goods to countries like Jamaica where they flood local economy’s with super cheap American goods preventing local business, farmers in particular, from becoming self sufficient. Cutting foreign aid sounds bad but in reality is one of the best things the United States could do for the global economy.

Good post. Keep it up.

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