David R. Henderson  

I Agree: Budget Cutting is Easy

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The Shifty Economy... Television Defended...

Like Arnold and some of his commenters, I found it way easier than I thought it would be to cut the federal budget on the New York Times' interactive site.

After I was done, the Times announced that I had solved the deficit. How did I do so? Entirely with budget cuts, with one exception. On spending, I took all the budget cuts offered, and the most radical version of each, except that I didn't cut Social Security benefits for people with higher incomes. I probably should have. The only exception is that I did increase taxes by having the favorable tax treatment of employers' contributions to employees' health insurance phase out gradually.

And Eureka! By 2015, I had eliminated a projected deficit of $418 billion and changed it into a surplus of $41 billion. By 2030, I had eliminated a projected deficit of $1,355 billion and changed it to a surplus of $329 billion. And these really were relatively small changes: cutting government pay by 5 percent (I've been advocating cutting it by 10 percent), just reducing the number of troops in Iraq and Afghanistan by 2013 (in an antiwar speech I gave yesterday, I advocated getting the U.S. government out of Iraq and Afghanistan), ending a few agencies, cutting aid to state governments by a small percent, etc. What it really shows is just how massive the federal government is.

Here's a prediction: if the New York Times keeps this game up on its site, a whole lot of people are going to be more sympathetic to cutting government and more optimistic that it can be done. One of my objections to Tea Partiers is how uninformed some of them are about the numbers. Now, thanks to the New York Times, they don't have to be.


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CATEGORIES: Fiscal Policy



COMMENTS (15 to date)
MPerry writes:

I did it with 84% budget cuts and 16% tax increases. Most of the cuts they offered I wish had been larger.

TimA writes:

I was disappointed to see that all the tax increases projected an increase in government revenues. Perhaps someone on the other side of the Laffer Curve could post a counter-proposal where all the tax increases decrease government revenues.

Ted writes:

Here's something even more interesting. On the game you can go a long way towards balancing the budget by doing absurdly simple cuts(i.e. I think we are okay if we reduced are nuclear arsenal from destroying the world 3 times over to destroying the world 2.5 times over). I was able to eliminate about 40% of the budget deficit by eliminating totally wasteful programs that literally nobody cares about. I didn't raise any taxes and I didn't even touch Medicare or Social Security and I got 40% of the way to deficit neutrality.

This leads me to think that if we could actually have a much broader menu of government spending we could easily pass the 50% marker by eliminating programs nobody cares about. Obviously the NYT can't include all government spending, but if I was able to get 40% on waste cuts I think we could get 60% easily if we saw the entirety of government spending.

The beauty of this game is that it's now proven you can go a long way toward deficit reduction with basically no pain to the general public - at all. Now I don't think any politician has the excuse to say deficit reduction is hard. I always knew there was a lot of wasteful spending - I didn't think it was this large though.

Joe Cushing writes:

Ted

Why cuts ARE hard

There is no such thing as a program nobody cares about. Every dollar the government spends has somebody who receives that dollar. It's amazing how a very loud minority of people can control congress--think farm subsidies. Only a very small decimal percentage of people receive those, yet somehow,we can't seem to get rid of them. It's because there are many such programs paid by many people who have a small steak but revived by a few who have a large steak. So there is an imbalance of interest between the groups. Maybe today with people facing tax increases, or else, some of these programs will be easier to cut because interest in cutting programs has grown. We need politicians who don't know it's hard to cut programs. Our current ones are all programed to believe if they make cuts, large organizations will take out smear campaigns. against them. Think for example if you want to admit that the small class size experiment showed the small classes didn't work and so you want to cut teachers. Bam, outcry from the union who will spend money to tell people you are a bad person for reasons that have nothing to do with the cut. If elected officials aren't in fear of this smear campaign, cuts are easy.

MikeP writes:

I, too, thought this would be difficult due to similar exercises with California's budget.

But at the federal level it is downright trivial. I cut all tax loopholes I could, cut taxes otherwise as much as I could, and took all the highest outlay cuts possible. I can offer a $100 billion tax refund in 2015 rising to $600 billion in 2030.

I guess the ease of the federal budget compared to the state government is due to two things: (1) how much the feds do that is entirely outside their justifiable powers, including social engineering via taxes, and (2) the truly massive amount of money that flows through those programs, especially Social Security and Medicare.

David R. Henderson writes:

@Joe Cushing,
I agree. What I mean is that, however hard it is politically, you can come up with cuts that aren't very disruptive and, in fact, are likely to make things much better. I think MikeP put it well.
Best,
David

Johnalee writes:

This was a very interesting experiment. I also managed to "solve the deficit" through a series of spending cuts and without raising taxes. However, it is illogical to think that this would actually happen. The federal government isn't going to make two dozen spending cuts within the course of a few years no matter how bad the projected deficit seems. Things work too slowly in Washington to really solve the deficit on a large scale, as it seems in the simulation. At best, we can hope for a smaller deficit and the tightening up of some federal spending, but not all of it.

As earlier readers stated, the problem lies in politicians that are too afraid to even vote for drastic change. Small fringe groups like farmers who receive government funding are effectively controlling all legislature on the matter. While this works out great for them, it forces the vast majority of others to fund their projects with our tax dollars. As long as politicians value their own re-elections over the good of the nation's economy, these problems will remain unsolved.

Mike writes:

If the NYT were really smart and/or concerned about making a positive contribution to the budget debate they would do the following. Allow people to go through the exercise of filling out the interactive site form and also include a survey form which identifies their attributes: demographics, political leanings, etc. Then have the response stored in a database. They could then mine the database by constructing a model of a cross section of America by demographic and political leanings using the recommendations of that slice of the participants. Add everything up and poof you've got an estimate of a solution America would find acceptible.

What say you America and NYT? Let's get on with it!

David R. Henderson writes:

Fantastic idea, Mike! Also, they would widen the net. Allow us to cut, say, the Department of Energy, to zero without cutting its nuclear weapons program. But also allow us to cut its nuclear weapons program--by 5% or 20% or 80% or 100%--etc. Allow us to get rid of Pell grants. Cut the White House and Congressional budgets by 20%, etc.

Mike writes:

David

Not that I disagree with you but many would argue your views prove you are a "wing nut." The nice thing about this approach is your (and perhaps mine) views would be weighted commensurate with the relative strength of our "wing nut" population. The real problem with this approach is whether you can trust the NYT to objectively determine the weights. Should your subpopulation be weighted .00005 or .5, the devil is in the details. Isn't this a great country!

BTW, just a very random observation, when I saw your picture I thought you were my brother. Are you sure you and I didn't get our wrist id's switched at the hospital?

David R. Henderson writes:

@Mike,
Hey, bro. :-)
I think most people who don't know me and simply hear my views would think I'm a wing nut. My point is that those were all "mainstream" cuts, methinks. Take every option I laid out above, and some mainstream politician with an R or D after his name has advocated it sometime in the last 30 years.
It's when we advocate getting federal spending below 5% of GDP that the "wing nut" label kicks in. And, as for my fellow blogger, Bryan, don't get me started. (The last sentence said with tongue firmly in cheek and total respect for Bryan.)

Brett writes:

I agree that cutting the federal budget is the key to eliminating the deficit. The government is currently conducting unneeded spending. This needs to stop. I also like that you refrained from cutting Social Security. Retirees have spent their time working for this country and it is time that the country works for them. I am not in favor of increasing taxes unless completely necessary. I believe that a much needed budget cut is that to foreign aid. We should not continually bolster other countries when our own is in trouble.

Mike writes:

Upon re-reading my post I realize my response was a bit too flip. I had no intention of suggesting your ideas were of the "wing-nut" variety. I was trying to emphasize the importance of an objective design by someone like a Rasmussen type pollster and a good policy analyst type. Please accept my apology for my impolite response.

I think someone with more website ability than I could take the core idea of the NYT and add additional items such as your suggestions and others. Is there anyone out there who might be interested in such a project? I think it has the potential to make a valuable contribution to get our overspending government under control.

David R. Henderson writes:

@Mike,
No apology necessary. I didn't think your comment was impolite.
Best,
David

Carl The EconGuy writes:

Dumb game. To make it hard, add two things.

First, you have to do the cuts and then get reelected. Oops, now it got harder. It's not an academic game anymore!

Second, to get reelected, you need campaign contributions. The best way to get contributions is to cede to special interests. Payoffs are in the system!

Darn it, now it got really, really tough. So many objectives, and so many constraints. How do I optimize now? Wait, wait, don't tell me -- I think I'll just spend some more. Deficit reduction can wait. Tax that guy behind the tree, and spend on my friends RIGHT NOW. Cool! SO THAT'S HOW THIS GAME IS PLAYED!

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