Blog on the Run: Reloaded

Friday, July 2, 2010 8:48 pm

Try this at home, kids

Filed under: More fact-based arguing, please — Lex @ 8:48 pm
Tags: ,

Fixing the deficit with the Center for Economic and Policy Research’s deficit calculator.

The calculator begins with the baseline that if nothing much changes, then by 2020, the national debt will be 85% of GDP. If you want to follow the Willie Sutton philosophy and go where the money is, the only single items things that take big chunks (5 percentage points or more) out of the debt over the next 10 years are:

  • The Fed buying/holding $2 trillion in debt: gets debt down to 71% of GDP.
  • Negotiating Medicare drug prices: 75%
  • Financial Speculation tax: 75%
  • Allow all (Bush-era) cuts to sunset: 78%
  • Quick end to Iraq/Afghan wars: 80% of GDP.

I don’t know enough about the ramifications of the Fed’s buying/holding that debt to endorse it. Negotiating Medicare drug prices we definitely should be doing and that should have been incorporated into health-care reform, Big Pharma be damned. A financial speculation tax is a good idea; markets need to be allocating capital for productive long-term investment, not quick profits. Sunsetting the Bush cuts makes perfect sense; those cuts account for about a third of the current size of the deficit and were ill-advised from the start. And getting out of Iraq and Afghanistan is such a moral and practical imperative that the economics, though significant, are almost beside the point.

There are other options on the calculator, many of them attractive, but most aren’t going to make more of a difference than a point or two. Still, keep in mind that I’ve addressed each of these items in isolation. Although enacting some of them together might well have effects that wouldn’t occur if only one were enacted, together they’ll also substantially reduce the projected debt load. And we can probably find a politically acceptable approach that will bring the debt down substantially without putting seniors on a cat-food diet.

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