The CBO came up with a neat summary table of the deficit-reducing punch of a whole bunch of different proposals (PDF). It's good to see it. Far too often, deficit discussions in Washington start with a dollar figure and then reason backward toward what kind of "painful sacrifices" need to be made to meet the target. It's better to start with the ideas, pick the good ones, and see where that leaves us.
On the menu, I like the following (all dollar figures are over a 10-year horizon):
- Change the terms and conditions for federal oil and gas leasing: $6 billion in deficit reduction. (This is literally the elimination of inefficient rents.)
- Reduce subsidies in the Crop Insurance Program: $27 billion (Ag subsidies are distorting and unjust.)
- Eliminate direct payments to agricultural producers: $25 billion (Ag subsidies are distorting and unjust.)
- Eliminate grants to large and medium-sized airports: $8 billion (No national interest here; state and local government should fund.)
- Eliminate subsidies for Amtrak: $15 billion (Same as with the airports but impacts different jurisdictions.)
- Convert the mortgage interest deduction to a 15 percent tax credit: $52 billion (The deduction is regressive, distorting, and environmentally deadly.)
- Increase excise taxes on motor fuels by 35 cents and index for inflation: $452 billion (cleaner air)
- Increase all taxes on alcoholic beverages to $16 per proof gallon: $64 billion (less crime, better public health)
- Impose a tax on emissions of greenhouse gases: $1.06 tillion (environment)
- Increase the excise tax on cigarettes by 50 cents per pack: $37 billion (public health)
- Add a “public plan” to the health insurance exchanges: $37 billion (rent reduction)
- Impose a tax on financial transactions: $180 billion (less wasteful churn)
- Impose a fee on large financial institutions: $64 billion (basic fairness, safer financial system)
That's $2.027 trillion dollars in deficit reduction that are composed of good ideas that would make the economy more efficient, the environment cleaner, and the population healthier. My sense is that in practice it would be a mistake to do this much deficit reduction. You would want to partially offset all this with some basic tax cuts. That said, I also left off the list an additional $625 billion in possible military spending cuts that sounded appealing to me. My view is that the Department of Defense's primary mission should be the defense of the United States of America (it's in the name and an awful lot of the associated rhetoric), but obviously there's a strong congressional consensus in favor of some other mission, and this isn't really a foreign policy blog.