You Solve The Budget/Deficit Problem

I explained earlier that I solve the problem as presented in the New York Times. Here is the summarized results so far. Now you can take a whack at the problem for yourself. Good luck.

How Readers Chose to Fix the Deficit
By DAVID LEONHARDT

Reduce the size of the military rather than reduce pay for noncombat members of the military. Impose a millionaire’s tax rather than cut deductions for high-income households. Cap the growth of Medicare spending rather than raise the eligibility age.

These were among the choices made by readers who completed the online you-fix-the-deficit puzzle that accompanied a Week in Review article last Sunday. Since the puzzle went online, there have been more than one million page views, and more than 11,000 posted Twitter messages about the puzzle, most including their own solution. The Times analyzed those solutions, each of which cut at least $1.345 trillion from the 2030 deficit, to get a sense of readers’ choices.

This sample is obviously not scientific. But many readers asked for a tabulation of the responses, and taken together, they offer a glimpse of specific preferences within two groups: those who far prefer spending cuts, and those who want to mix cuts with tax increases. The responses also point to a deep divide between those two sides, illustrating why a solution is difficult.

The single least popular choice was allowing the expiration of the Bush tax cuts on income below $250,000 a year. Fewer than 10 percent of the solutions included that option. But when it came to tax cuts for incomes above $250,000, people’s opinions appeared to diverge according to their political views. Those who preferred spending cuts — a conservative group, in all likelihood — generally wanted this tax cut to remain in place. Among those who closed the deficit mostly with tax increases — probably a liberal group — the expiration was the single most selected policy.

The most popular option among all respondents? Reducing the military to less than its size before the Iraq war — included in about 80 percent of the solutions posted to Twitter. But cutting pay and benefits for the military was a choice of only 40 percent.

Given that Twitter users skew young, one arguable surprise was the reluctance to raise the eligibility age for Social Security (above 67, as is now scheduled) or Medicare (above 65). The four options that would have increased those ages, to either 68 or 70, were all among the 10 least popular. Making other changes to those programs — like reducing Social Security benefits for high earners and capping Medicare growth by cracking down on high-cost hospitals and doctors — received more support.

In the last week, readers and bloggers have also suggested dozens of cuts that did not appear among the puzzle’s options. Anthony Tedesco, in an e-mail, argued for a tax on sodas and a higher federal tax on alcohol. On Wednesday, a bipartisan group led by Pete Domenici, a former Republican senator from New Mexico, and Alice Rivlin, a Democratic budget expert, released a deficit plan that included a soda tax. It would raise about $15 billion a year in today’s dollars, roughly as much as eliminating farm subsidies or cutting foreign aid in half.

Others wanted more aggressive versions of existing options. Some readers, for example, wanted to cut entire departments, like Agriculture and Education. As is, the puzzle allows readers to cut aid to states 5 percent, cut the pay of civilian workers 5 percent, reduce the size of the federal work force 10 percent and eliminate 250,000 government contractors. Together, those options would close 7 percent of the 2030 budget gap. A larger set of cuts to domestic programs other than Social Security and Medicare might close 15 or 20 percent.

On the tax side, Felix Salmon, a commentator for Reuters, wrote that the options hewed too closely to the current code. He said he wished that he could have imposed a wealth tax or abolish, rather than reduce, the mortgage deduction. Mr. Salmon also suggested subjecting all income to the payroll tax that finances Social Security, rather than merely raising the ceiling on taxable income beyond the current level of $106,800, as the puzzle included.

The puzzle remains online, and version 2.0 may lie in the future. Comments continue to be welcome. Given how far Congress seems from enacting any deficit-reducing proposal, this debate will probably be around for a long time.