How to Balance the Federal Budget?
November 19, 2010
It’s a promising development that smart people are putting out various plans to address the federal government’s serious long-term fiscal imbalance. First, of course, there was the Roadmap put out by Rep. Paul Ryan (R-WI). After sitting out there alone for a while, it was joined earlier this month by the Bowles-Simpson plan from the co-chairmen of the Deficit Commission working on a bipartisan report which relies heavily on spending cuts. (Bowles and Simpson responded to their critics, which are mostly from the extremes of both sides, here.) We now also have the Domenici-Rivlin plan, with a VAT as a key feature, and the Schakowsky plan, that cuts defense but increases other spending and raises taxes.
Unsatisfied with these proposals, Americans for Tax Reform (ATR) has undertaken to develop a plan that balances the federal budget within 5 years without raising taxes, cutting Social Security, or cutting Medicare. Check it out here. Manhattan Institute fellow and former Tax Foundation economist Josh Barro responded here, criticizing the ATR plan for relying unrealistically on multi-year spending freezes, underestimating the costs of interest on the national debt, and expecting too much economic growth from a tax reform that doesn’t tackle provisions that generate a lot of deadweight loss. ATR in turn responds here, and Barro responds again here.
What does your ideal budget look like? Does it preserve Social Security in its current form? Medicare? Defense spending? Should it preserve existing tax policy or reform it? Higher or lower or the status quo? How fast should the budget be balanced, if it should be balanced at all? How much debt is too much debt? More services or fewer? Who should pay for them?
Stay tuned for more on this vital topic.