Something worth saying explicitly about any kind of budget deficit calculator is that what looks like a decent answers ends up having a lot to do with who frames the calculator. When I used the NYT calculator to generate a budget plan I ended up with some fairly conservative ideas. By contrast, when I used CEPR’s calculator I did the following:
— Fed buys and holds $1 trillion in bonds.
— Downward adjustment of Social Security COLA 0.3 percentage points.
— Higher Social Security benefits for low-income people.
— Quick end to wars in Afghanistan and Iraq.
— Cut missiles and missile defense.
— Cut size of conventional forces.
— Impose “upstream” price on GHG emissions.
— Increase gasoline tax by 50 cents per gallon.
— Public option in ACA exchanges.
— Convert home mortgage interest tax deduction to a 15% credit.
— Financial speculation tax.
That got the 2020 debt-to-GDP ratio all the way down to 50 percent. The only conservative idea in there is a very modest cut in Social Security benefits that’s used to finance more generous benefits for the most elderly people. It’s true that the ecological tax increases will be fairly regressive in their impact, but much less so than broad cuts in Social Security benefits or discretionary spending would be. And crucially though the tax increases in this proposal are pretty large, they should have a minimal—or even positive—impact on the efficiency with which the overall economy operates. All in all, an excellent deal.
That said, the really crucial thing to recognize about this alternative proposal is that all this stuff merely forestalls the arrival of budgetary doom. That’s because, as Ezra Klein emphasizes, the long-term budgetary doom is all about the cost of old people’s health care. Mostly Medicare but also Medicaid as well. And that, in turn, isn’t really about any flaws in the design of the programs. It’s about the fact that the programs are designed to give senior citizens all the health care that they need and and “health care” constitutes a moving target whose price keeps going up. The only things that really cope with that are some form of cost-effectiveness rationing, some form of price controls (which would make more things cost effective), or else just covering fewer people.