WSJ's "Roll Your Own" Deficit Reduction
By David Henderson
The Wall Street Journal has on its site a list of options for reducing the projected $1-trillion-plus federal budget deficit for 2020. It’s a list of cuts in discretionary spending, cuts in so-called “entitlement” spending, and increases in taxes. I don’t know if you can get there without a subscription to the WSJ, but here’s the link.
What I found, and I noticed this with a similar New York Times link two years ago, is how easy it is to get the deficit down to “only” a few hundred billion with no major tax increases. I say “easy” meaning, not that it’s easy politically, but that one can do it without causing major hardship and disruption.
Why did I “settle” for a few hundred billion rather than a zero deficit? Three reasons. First, because I wanted to avoid major tax increases. Second, if you get the budget deficit down to under $300 billion, then even a modest inflation rate of 2% in 2020 will eat away the existing federal government debt so that the net increase in real debt is zero or negative.
The third reason that I “settled,” though, was that the Wall Street Journal rigged it that way by severely limiting the options. I was hoping to get a chance to bring home all the U.S. troops from around the world but it didn’t give that option. I wanted to end the absurdly expensive Joint Strike Fighter airplane program: again, according to the Journal, no can do. I was hoping to get rid of the Department of Energy and the Department of Education and Homeland Security, but, again, it didn’t give that option. I wanted to cut the State Department in half (hey, I felt modest this morning and so I didn’t go further.) Again, it didn’t give that option.
Note that the WSJ categorizes “increasing passenger fees for airport security and air traffic control” as a budget cut. Not quite. It’s a tax increase.
Try your hand at it and see how you do. Report back in the comments if you care to.
HT to Greg Mankiw.