The New York Times has a wonderful tool for understanding how the recommendations of the presidential deficit commission could work to close the estimated annual budget shortfalls in the future. You simply go through and select spending cuts and tax increases until the budget shortfall is corrected for both in the present and future.
Below is a screen shot of my results from using the NYT‘s budget tool. As you can see, I was able to more than offset the budget shortfalls through 2030 without raising any taxes. The biggest component of this fiscal program came by capping Medicare growth to GDP. Given the policy options before me, I fell 13 billion short on the current budget deficit. With more dramatic cuts, everyone could take home more of their paycheck and enjoy more economic growth in the future.
If you include the Bowels-Simpson tax reform proposal that reduces tax breaks for companies and individuals, lowers individual tax rates in all brackets, cuts the corporate tax rate from 35 to 28 percent, and removes more particular tax credits like the first-time home buyer credit, my results look like this:
Despite the usefulness of this tool for making public policy proposals digestible, it is important to keep in mind that this is only the first stage in a democratic reform package that is likely to be watered down by both parties. Moreover, while critics on both sides suggest the proposal is dramatic—I would argue the proposed cuts are not nearly as deep as required.
My version would include the following revisions:
In short, if everything really is on the table then the commission to propose dramatic cuts limiting the size and scope of government should go big or go home. Without dramatic reductions in government spending, America cannot grow its way out of the fiscal-crisis scenario we are facing. No amount of Keynesian hand-waving can remove the fact that the more of GDP government consumes the more difficult it becomes for the private sector to generate the growth and prosperity will all want for our future.