Look, Mom, I reduced the United States's national debt in 2020 to 37% of GDP using CEPR's Deficit Calculator!
This calculator allows users to pick various items and see how they'll shrink (or grow) the debt by 2020.
37% of one year's GDP may sound like a lot but it's actually a pittance, especially for an economy as big as the USA's. The Center for Economic and Policy Research estimates that if we continue on our present course, America's debt-to-GDP ratio will be 85% by 2020. That may be too optimistic.
A report by the Department of the Treasury estimated that by 2015 the net public debt will rise to $19.6 trillion. But as Zero Hedge's trenchant Tyler Durden explains, TreasSec Geithner's projection was based on unrealistically robust estimates of U.S. economic growth at 6% from 2011 to 2015. Check out Durden's cool charts where he plots believable estimates on top of the Treasury's rosy ones. Durden says we'll have well over a 120% debt-to-GDP ratio by 2015.
So anyway, how did I cut the deficit? Here were my choices:
Defense
> Quick end to wars in Iraq and Afghanistan (30,000 regional troops by 2013)
> Cancel or delay various defense systems and platforms (like the boondoggle Osprey and F-35)
> Improve military efficiency
Environment
> Impose upstream price on GHG emissions
Health care
> Public option (save money, cover everybody, but grandma becomes Soylent Green -- good deal, right?)
Social Security/Retirement
> Increase cap on taxable earnings to 90% (up from about 82% today)
> Progressive price indexing of Social Security
> Raising the normal retirement age of Social Security (increasing 2 months per year starting 2016, up to age 70 by 2040)
Spending
> Freeze nominal discretionary spending at 2013 level (education, research, transportation, DOJ, DOS, etc.)
Taxes
> Financial speculation tax (0.25% on sale or purchase of stock)
> Allow all of Bush's cuts in marginal rates to sunset
> Do not modify estate and gift tax rates when Bush's tax cuts expire
> Convert mortgage deduction with 15% credit
And voila! Painful, maybe. Effective, you bet. Play around with the choices and see how much you can cut the deficit. Unfortunately this calculator won't let you get down to the level of detail that some of you would prefer, for instance "Cancel all school lunches and afterschool programs," "Abolish Medicare, Social Security and the Department of Education," or "Cancel Congressional pensions and cut their pay by 50%." So, this calculator may be a bit simplistic but it gives you an accurate idea of the relative effect of each option on the U.S. budget deficit. You can also see how we'd compare to other countries's debt-to-GDP.
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