There are many different ways for the US to increase revenue and/or cut spending. If we can decide on a package of specific revenue increases and/or specific spending cuts that puts us back in the black, we’ve solved our problem.

Interestingly, in modern US politics one of the two major political parties has specifically taken one of our two major avenues to the solution (revenue increases) off the table. Due to dogmatic ideological beliefs, they’ve consistently supported decreasing revenues (tax cuts), which obviously moves us deeper into our problem and forces us to make even harder choices. Specifically, the massive “Bush Tax Cuts” increased our yearly deficit and thus also our total national debt by a gigantic amount of money. These cuts were deemed irresponsible in the long term by their original designers and were set by law to expire, but we’re now seeing politicians fighting tooth and nail not only to prevent the lawful expiration but to also cut taxes even further than these already-historical-lows.

Sorry for the tangent, but it is good to understand the context when imaging solutions to a problem. In our case, we can look at all the available solutions and come up with a package that we think is wisest, but we must keep in mind that an entire sector of potential solutions, revenue increases, will be fought against tooth and nail by one of the two major political parties.

So, on to solutions. The following tool is great:

http://www.nytimes.com/interactive/2010/11/13/weekinreview/deficits-graphic.html

You’ve probably already seen it and used it. There are other similar tools on the web, but they all include roughly the same potential options and roughly the same overall dollar figures. When you sit down and use one of these tools you will likely be struck by two surprises. One, the magnitude of the problem is truly gigantic – so gigantic that it is hard for a person to truly comprehend. Two, it is actually not that difficult to solve the problem as long as you are willing to make drastic cuts to one or two large ticket items.

I consider myself a classical Conservative. I have a dim view of human nature, oppose utopian policy making, and advocate pragmatic policy that helps the largest segment of Americans possible. Let me share with you the specific boxes I tick on the NYT tool to fix our budget problems. You may be surprised to hear what options I put together to completely fix the problem:

1) Reduce nuclear arsenal and space spending (not necessarily a total waste of money, but not wise when we are pinching pennies)
2) Reduce military size to pre-Iraq levels and remove troops from Asia and Europe
3) Reduce our troop count in Iraq and Afghantistan to 30,000
4) Enact medical malpractice reform (very small dollar amount realized, but hey, its still a good idea)
5) Reduce tax break for employer-provided health ensurance (a massive distortion of the market for health insurance)
6) Reduce social security benefits for those with high incomes
7) Return the estate tax to Clinton-era levels
8) Allow the Bush tax cuts only for those who make over $250,000 a year to expire (as already dictated in law)
9) Adjust the payroll tax upwards a bit to cover the same percentage of wages it was originally intended to cover
10) Add a new top tax bracket for people making over $1 million per year (i’d like to add more tax brackets in between and above as well, but no option is given in the tool for this)
11) Eliminate tax loopholes similar to Bowles-Simpson
12) Eliminate the mortgage deduction and other similar deductions for high income earners
13) Install a carbon tax (as proposed originally by conservative think tanks 20 years ago)

There you go. Honestly, I don’t think any of the options I’d choose are extreme. Every option on the table comes with benefits and drawbacks. My method is simply to select any option that restores military spending or tax revenue to roughly Clinton levels (or better yet, Reagan levels, but that was not an option in the NYT tool). I think the Bush detour into unneeded wars and irresponsible tax cuts was dangerous and the primary cause of our problems right now. You can clearly see this when you use a budget tool like the one linked above.

One item not included in the NYT tool is to roll back Medicare Part D, the largest domestic spending item passed in the last couple decades. I don’t think it was wise to increase Medicare spending so greatly and needlessly while the original program itself is in danger of cuts. Why does one major political party first pass something like Medicare Part D while it is in full control of the white house and congress, and then advocate massive cuts to the original core of Medicare several years later? I don’t know. It is hard to answer such questions about motivation. But I can say with certainty that no cuts to Medicare or Social Security are necessary if you are simply willing to roll back recent military spending and recent massive tax cuts and benefits for the wealthy.

I hope you find this info interesting. I’m sure you will disagree with many of my policy stances, but I hope we can all at least agree that the problem is very solvable and the only question is about our priorities as a nation. Do we want to keep military spending and tax rates on the wealthy at historical lows while taking apart social programs for the middle class, or do we want to roll back military spending and tax cuts for the rich to Clinton (or, god forbid, even Reagan) levels? We all have to make this choice for ourselves and we’ll see the argument being played out in politics over the next few years.