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Big Spender or Skinflint? Do Try This at Home

Posted By Prucia Buscell, Thursday, November 18, 2010
Updated: Thursday, February 17, 2011

Slash military spending? Shred the social safety net? Reduce taxes? Raise taxes? Appoint another blue ribbon commission?

A $418 billion federal budget deficit projected for 2015 isn't small potatoes. Politicians, pundits, TV talking heads and ordinary citizens are talking about deficits and their opinions that are often adamant and emotional. "O.K., You Fix the Budget," an interactive online puzzle created by the New York Times, is a terrific challenge for all of us to come up with new plans to repair the nation's finances. New York Times economic writer David Leonhardt describes how the exercise came about, and how it was designed with the aid of policy analysts and economists with conservative, centrist and liberal views.

Economist William Gale of the Brookings Institution points out in Leonhardt's story that voters have tended to reward politicians who say they worry about the budget much more than politicians who are actually willing to cut specific programs or raise taxes. In fact, Politico.com recently reported that the House Appropriations Committee, which has control over spending and used to be a plum assignment, scares a lot of politicians these days: several would-be budget cutters have declines an opportunity to serve.

Of course, not everyone thinks deficits are deadly. Several prominent economists, all considered progressive, challenge the whole premise that our current deficits are an evil that will burden future generations and ferment national decline. Paul Krugman, a Pulitzer prize wining economist and Times columnist, wrote in February that "fear-mongering on the deficit may end up doing as much harm as the fear-mongering on weapons of mass destruction." He says running big deficits during a recession is the right things to do, and the deficits should actually be bigger because we ought to be doing more to create jobs. But of course, no one thinks the present system is perfect.

Back to the challenge at hand. All economists agree that short term and long term deficits are different. So you are challenged to cut $1.345 trillion from the 2030 budget. By that year, many retired baby boomers will be depending on Social Security and Medicare, and health care costs are escalating every year. The Times offers options for cutting spending in domestic programs, foreign aid, health care, the military and social security, and 15 revenue options through changes in taxation. Confused about all those decisions? You can access opinions of experts and scholars.

Princeton Economics Professor Uwe Reinhardt says that Americans pay less in taxes than people in the rest of the industrialized worlds, and that we tend to want services we don't want to pay for. He suggests a deficit reduction framework with 38 per cent in spending cuts and 62 percent in tax increases. Your own social and political views will influence how you break it down, but you can't reasonably fix the budget with spending cuts or tax hikes alone. Take the budget challenge here. You can even share your plan on line.

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