There are two ways to address the mid-term to long-term fiscal deficit. One way, which Paul Ryan and the Republican presidential candidates prefer, is to eliminate every dollar that we spend to invest in our country’s future and support the poor and middle class. Yet if we are a society that believes in taking care of the poor and elderly and investing in our future, there are numerous fair, humane, and sensible opportunities to cut spending and raise revenues that don’t involve cutting programs that are essential to our nation’s well-being. A recently released plan called“Our Fiscal Security,” crafted by the Economic Policy Institute, Demos, and The Century Foundation, has a variety of ideas that allow us to plug the long-term fiscal deficit with sensible and fair measures.
One very quick way to get our long-term deficit under control is to let the Bush Tax Cuts expire, which would increase revenues by $3.3 trillion over the next ten years. These savings would immediately decrease our deficit to a sustainable level. President Obama does not plan to renew the tax cuts for the top two percent of earners, but even the middle-class and lower-income tax cuts are heavily slanted towards the wealthy, and the vast majority of Americans would see a only a small change in their tax bills if rates changed back to Clinton levels.
The Bush tax cuts are far from the only regressive and wasteful measures in our tax code. Capital gains and dividends are currently taxed at 15 percent, a regressive measure which allows the financial sector to grow larger than necessary and allows the rich to pay lower tax rates than everyone else. These should be taxed as ordinary income, a measure that would bring in $917.6 billion over a decade. Returning the estate tax to Clinton-era levels, making the mortgage-interest deduction more progressive, implementing a millionaire’s tax, and eliminating the payroll tax cap are all additional and sensible measures we can take to bring in needed revenue.
On the spending side, as we face a future of limited resources, we can significantly cut back on unnecessary expenses while still maintaining a strong military. The bipartisan Sustainable Defense Task Force has found $960 billion in savings over the next 10 years through small but sensible downsizing of our nuclear arsenal, European and Asian bases, and weapons systems, as well as consolidation of overlapping organizational structures, brigades, and combat teams. We’d still far and away be the strongest military in the world with a downsized force of 230 Navy battle ships, 1,000 nuclear weapons, 65,000 troops in Asia, and 23 Marine Corps infantry battalions, to name some of the task force’s specific targets.
Because healthcare costs are rising at a rapid rate, Medicare and Medicaid costs are another sizable driver of the long-term deficit. Republicans realize this and plan to decrease government expenses by shifting the responsibility for payment to poor and senior consumers, instead of fighting the sources of rising costs. In the Affordable Care Act, Democrats take multiple positive steps towards controlling healthcare costs, including a surcharge on expensive health insurance plans and an Independent Payment Advisory Board to help control payments to doctors and hospitals. The Congressional Budget Office estimates the bill will save $143 billion over ten years, and President Obama has proposed strengthening these cost controls to save up to $290 billion more in the next decade. The reform bill’s savings will be much larger in reform’s second decade, and Harvard professor David M. Cutler '87 has estimated that many of our test and pilot projects to control costs might bring savings much larger than CBO estimates.
As we look towards industries of the future and fighting climate change, carbon and gasoline taxes are deficit-cutting measures that should bring together deficit hawks and environmentalists. A sensible carbon tax where half the allowances would be repaid to poor and middle-class consumers could still raise $52 billion for the government over the next decade, while increasing the gas tax by 25 cents a gallon could raise $305 billion over the next decade. These measures would create major incentives for investment in the clean energy industry while having a significant impact on emissions and individual behavior.
The deficit debate is all too often framed by conservatives as a situation in which we have no choice but to cut services to the poor, sick, and elderly. Yet we always have a choice when it comes to our budget, and this plan gives us an opportunity to implement a more fair taxation system while setting sound policy and preserving the social safety net. Paul Ryan and the Republican presidential candidates have made the deficit debate one about our values, and it’s time for progressives to put forth proposals that are intelligent and fair.
Ravi N. Mulani ’12, a Crimson editorial writer, is an applied math concentrator in Winthrop House.
The Pledge to the Top One PercentThe Republicans have a lot of old, tried, and discarded ideas in their tax plan.
FAS Approaches End of DeficitCompared to peer institutions like Yale and Princeton, FAS has reduced its deficit, which today stands around $35 million, more efficiently than other universities.
The Other DeficitThe most important deficit in America today is the one we’re not talking about.
FY 2011 Budget Deficit ClimbsThe University closed the 2011 fiscal year with a $130 million deficit on $3.9 billion in expenses, a significant jump from the last year’s annual deficit of $900,000, according to Harvard’s annual financial report.
Housing Problems, FAS Deficit, and Harvard Prep
Conversations: Barney FrankCongressman Barney Frank ’61-’62 has represented Massachusetts’ Fourth Congressional District for more than 30 years. Last fall, he announced that he would not be running for re-election. Frank spoke with FM last week about Massachusetts’ U.S. Senate race, where Congress is headed, and what’s at stake on Nov. 6.