Quite a few people are all atwitter about the New York Times’s “You Balance the Budget” game. If you’re interested in how I approached the task, my results are here (PDF). In general, I cut defense spending, raised taxes, and cut healthcare spending. Those are the big ticket items at any rate.
My colleage at OTB, Doug Mataconis’s results are here.
I think the game is counter-productive, even pernicious, for a number of reasons. It’s not complex enough. You should be able to means-test Medicare as well as Social Security. There are any number of budgeting-cutting measures that are completely omitted. There’s no mention of increasing user fees. It combines some things that should be listed separately, e.g. reducing the size of the Navy fleet (which I oppose) with reducing the size of the Air Force fleet (which I support).
Possibly the worst defect of the game is that it resorts to handwaving in some critical areas. So, for example, “cap Medicare spending”, isn’t accompanied by the important “how?” I’ve given my answer here.
It trivializes the process. The question before us isn’t how we balance the budget. It’s how, in the absence of a consensus on what sort of a country we should be and in the presence of genuine differences of opinion, we can arrive at a political solution for balancing the budget that won’t wreck the U. S. or world economies.
Let me give some examples of some of the issues. I’m sure that “eliminate foreign aid” will be an alternative that many will select. What they don’t recognize is that a lot of U. S. foreign aid comes in the form of credits for the products of American businesses. Cutting foreign aid in that context means reducing subsidies for businesses. In the long run I’m in favor of that but in the short run I suspect it would drive us back into recession.
Similarly, I agree with the idea of reducing the number of federal employees and federal grants to states. However, doing so quickly enough so that it would have an effect on the budget by 2015 would add an additional million federal, state, and local government workers to the ranks of the unemployed. It’s got to be done more gradually than that.
It’s easy to balance the budget in the comfort of your own home, implementing solely your own priorities. Do your priorities represent the entire country? Do they represent anybody but you?
I have a suggestion for improving the NYT’s game. In addition to some of the things I’ve suggested above I think they should be capturing all of the preference data generated by people playing their game, eventually to publish it with some analysis of the broad patterns that are represented. I suspect that it would be very interesting and, possibly, horrifying to some.
Let me speculate on what they’d find. I think they’d find several patterns emerging, separately or in combination. I’m going to call these patterns “impulses”. Here are some of the impulses I suspect are present.
The Isolationist Impulse
This impulse would be represented by wanting to cut foreign aid and reduce U. S. military commitments abroad. This is a venerable view in American politics and it’s one with which I have a certain amount of sympathy. However, it’s short-sighted. Our foreign aid and foreign military commitments are a projection of our national interests. It’s true that we spend more than most (or even all) of the other countries in the world combined. That’s because the other OECD countries are all free riders on the world security and stability that our military expenditures provide. Everybody can’t be a free rider. Can we reduce our commitments substantially? Sure. Can we eliminate them altogether? That will probably cost us more than maintaining some level of commitment.
The Minarchist Impulse
This impulse is basically one to reduce everything—taxes, the military, entitlements, government subsidies of all flavors. Everything. This is another view with which I have a certain amount of sympathy. The U. S. of 2010 is not the U. S. of 1930. Government is an enormous part of daily life, too much, and constitutes a huge, intolerable drag on the economy. IMO there is no path to recovery that does not lie, in the long term at least, through a dramatic change in what the government does and how it does it.
The Welfare State Impulse
This impulse is, essentially, to emulate Germany. Cut military spending to a third of what it is now or eliminate it entirely. Tax more. Do not constrain the growth in Social Security, Medicare, or Medicaid spending. It works fine for Germany because the Germans can always free-ride off of us and there’s a U. S. to which they can export. We have no larger superpower on which we can rely and, as was seen in the G20 conference last week, all of the world’s exporters including Germany are vehemently opposed to our constraining our imports or expanding our exports. I also suspect that most Americans who admire this alternative have never lived in Germany.
The Jacksonian Impulse
Those who follow this impulse are likely to want to cut taxes and exempt the military from cost reductions. There may be some variants of this group, some wanting to preserve spending on Social Security and Medicare, others wanting to cut it.
These competing impulses are the nexus of the problems we have in arriving at fiscal sanity. For any one of these impulses to succeed fully means that the others must fail.
I don’t think it is necessary that the tool be that good. All that’s required is that it show you have to tackle Social Security and Medicare, and then that enough people play it.
We little people won’t be drafting the real solution. All that will be required of us is that we acquiesce to unpleasant changes.
Wide dissemination of this tool helps that, as does every repost about this tool, and changes to it, of course 😉
(It’s odd to criticize the web-app when it is such a tremendous improvement over “cut waste and fraud” as a “solution.”)
You may have noticed that I have never touted cutting waste and fraud as a means of balancing the budget. Consequently, I don’t think that my criticism is odd at all.
I don’t think this particular game is much better than the Concord Coalition’s version which has been around for years.
Come on Dave. I didn’t say you. It was out there. In fact I think “cut waste and fraud” was a major plank of a recent Presidential campaign.
What we’ve got here is a chance at a shift in public perception. It you stop and think about it, it’s what you want. And really, the details that bother you are just noise.
What matters is whether voters are ready to accept unpleasant solutions. With that a solution is possible, without it, no.
I don’t think that’s the conclusion that people will draw. Using the tool you can balance the budget without touching Social Security or Medicare at all. All you need to do is select every other budget-cutting measure and all of the measures increasing taxes. The tool also allows you to balance the budget without cutting anything except military spending and increasing taxes.
This also gets to the point I’d intended to work into the post but didn’t due to length issues: bad economic assumptions. I think that if you raise taxes as much as the “tax increase only” scenario provides for it will have serious economic repercussions which invalidate the whole exercise (which depends on certain levels of growth). Contrariwise, I think the “all spending cuts” scenario allows the player to ignore the implications of the decision which IMO will probably not result in actual spending reductions but just push them down to the state and local government level (where Medicaid and most programs for the poor are funded).
Somehow I don’t see people really choosing that as anything other than a test/play option.
The American people are not quite ready to choose “all of the measures increasing taxes.”
Nearly half of all Americans pay only FICA and sales tax.
Right. Our tax system is geared toward everybody being better than average ;-), and when everyone isn’t the budget doesn’t quite work out.
The tool was designed to get people to look at the process of budget cutting. There’s good to be found in that lesson. What I would have liked to have seen is another lesson factored into the tool design – decisions have consequences. Raise incomes taxes by X% reduces economic growth by Y%. Increase capital gains taxes by X% reduces investment efficiency by Y%.Reduce Medicare funding by X% increases patient discomfort by Y% and patient lifespans by Z weeks. And so on.
It’s one thing to play around with a budget tool which allows you to jack up taxes through the roof and pretend that there will be no countervailing effect on economic growth and job creation and another to understand the interlinkages at work which must be considered.
What would have been ideal is a java-enabled spreadsheet gadget that presented a simple economic model tied to the budget decisions.
Yes, TangoMan. Those are exactly the sorts of misgivings I have about it. But beyond that I think that the tool delegitimizes the process by making it look a lot easier and more pain-free than it really is.
But beyond that I think that the tool delegitimizes the process by making it look a lot easier and more pain-free than it really is.
With a bit of trickery lemons could have been turned into lemonade. First get people to check a list of items that they want to cut and which items should be left in tact. Then provide a more detailed list drawn from the items that they wanted left intact and ask them to cut those. The point is that each spending and tax item has a constituency that defends it, so this tool is asking you to cut only from the programs that you thought should be exempt from cuts. The tool doesn’t care about what you targeted for cuts because you obviously are not a defender of those programs.
If it’s easy to cut stuff you disagree with then have the tool make it harder by forcing you to find savings in the programs you support. That would be harder, wouldn’t it.
Dave understates the problem with the Medicare cuts. It’s described as a cap on medicare GROWTH starting in 2013, tracking GDP plus one percent. This single entry can take care of 42% of the longterm defecit.
This appears to be a solution that has no downside since it doesn’t reduce current benefits, nor arguably long-term benefits since it is allowed to grow. Yet, I somehow think it’s not so simple and I don’t know why.
BTW/ Dave, you’re results link doesn’t open for me.
It should work now. The results are in a PDF hosted at my site rather than hosted at the NYT site. I don’t trust the NYT to maintain the link indefinitely.
My choices aren’t too different from yours.
I’m surprised that you don’t propose raising the retirement age for SS — is that because there is no allowance for those in physically demanding jobs?
I’m more aggressive on reinstating the estate tax and support the Obama plan for taxing investment, but not the bank tax.
I oppose eliminating farm subsidies, but would support changing them. Primarily, I see this as a balance of trade issue, the question being whether to negotiate these subsidies as chits or to unilaterally surrender. I would prefer to do this through free trade negotiation. As an alternative, I would cut back subsidies that discourage marginal farm practices.
On foreign policy, I would like an alternative foreign policy to be proposed, instead of pieces that make up no whole. Most of the serious cuts in the military are, IMHO, isolationist or Jeffersonian. Reducing the footprint of troops in South Asia can be done with reliance on the Navy, predator drones, Marine expeditionary forces, money for basing rights, and money to foreign governments. It would be cheaper.
I stopped the program once I solved the deficit problem solely through spending cuts. Of note, I didn’t chose to restrict SS benefits for those with high incomes because I really don’t want to turn SS into another welfare program and I’d rather choose policies which reinforce the notion that it is a forced savings plan, where one’s benefits are tied to one’s contributions.
With all of the spending cuts I imagine that I’m envisioning a society as it existed in 1988 or thereabouts and frankly people are going to have a hard time convincing me that the size of government back then was too small and that our lives are so much more improved by ramping up the role of government to levels that we have today.
As a percent of GDP, government in 1988 was pretty good sized.
Steve
Absolutely. This is why I think predictions of something as dire as the Great Depression were basically hysterical nonsense. With the government being so large it acts as a automatic stabilizer at the very least. It is also why I think guys like Krugman and his followers are cranks. If the government being responsible for 20% of GDP is good then 30-40% must be even better!!! Sorry, but it doesn’t work that way.
Needless to say, my take at the NYT webtool was to go the minarchist route, but temper it to some degree. As much as I think we need a radical rethink on how we govern ourselves in this country change is not going to come quickly. If we implement just the changes to social security and medicare I’d consider it a huge move in the right direction…naturally I put those two items at having a chance just above that of a snowball in Hell.
Similarly, I agree with the idea of reducing the number of federal employees and federal grants to states. However, doing so quickly enough so that it would have an effect on the budget by 2015 would add an additional million federal, state, and local government workers to the ranks of the unemployed. It’s got to be done more gradually than that.
Those state and local government employees will be in the ranks of the unemployed soon enough. No reason not to add the federal employees too. We can keep the UE rates down by simply reducing the participation rate.