The Return to Normalcy Budget
Here’s a budget idea. No, it’s not perfectly aligned with my theoretical commitments. Is anything out there so aligned with yours? (Didn’t think so!)
My claims here are only (a) it would work (b) without the unrealistic assumptions of the Ryan proposal, or at least I infer, and (c) it’s not in any other way fiscally impossible. It also (d) has good policy consequences, like stabilizing Social Security and reducing the chance of getting stuck in future wars.
We’ll call it the return to normalcy budget. It’s got four basic parts:
- Return to Clinton-era rates of taxation, or at least something like them. As Ezra Klein has noted, this is very likely to happen in any event, because we’d need sixty Senate votes to extend the Bush tax cuts. We’ll just let them expire. As we’ll soon see, our Senators will be busy enough elsewhere.
- Remove the cap on the Social Security payroll tax. Yes, that means raising taxes. Yes, on the rich. Someone call the Koch brothers!
- Cap Medicare spending at GDP plus 1%. This is a doozy, I know. Can we do it? We’ll probably have to, like it or not, in any balanced budget plan.
- Reduce military spending to 1990s levels. In other words, bring the troops home. From everywhere. Let the force shrink by attrition. Cut spending on new weapons systems. Tell the world — much of it industrialized and friendly — that they will have to pay for their own defense, because we can’t afford it anymore. We’ve been doing way more than our fair share for way, way too long, and they can hardly say otherwise.
More or less, the plan would look like this. A Return to Normalcy budget might also include cuts to the Department of Homeland Security, and my policy priorities dictate trying to cut drug interdiction programs, too. These options aren’t given in the Times budget calculator, but they’re not going to make or break the effort anyway.
Also, I’d personally try to go further in cutting military spending than the Times allows, but whatever. Of the different calculators out there, theirs seemed the best suited to illustrate what I’m proposing.
The purpose of this plan is to show that, given what I take to be a completely unmovable American consensus — cuts to social welfare programs must never, ever happen — taxes have to go up. How high? Not very. And we can make those increases even smaller if we also cut defense spending. Do everything in the proposal, and we get budget surpluses. If we’re smart, this time around we’ll spend them on paying down the debt. That way, when the next crisis comes and we need quick credit, we won’t have to worry about getting it.
The 1990s were pretty good, I think we all have to admit. What’s so bad about going back to them? Look homeward, America. Return to normalcy!
 More on the methodology here, but not as much as I’d like.