Deficit Reduction

Military and "defense" costs far more than "just" $1 trillion every year.<p>There are many many hidden costs and the massive expenses for the thousands of severely wounded soldiers from Iraq and Afghanistan that survived instead of dying because of modern medical technology.<p><a href="http://en.wikipedia.org/wiki/Military_budget_of_the_United_States#Other_defense-related_expenditures" rel="nofollow">http://en.wikipedia.org/wiki/Military_budget_of_the_United_S...</a> <i>This does not include many military-related items that are outside of the Defense Department budget, such as nuclear weapons research, maintenance, cleanup, and production, which is in the Department of Energy budget, Veterans Affairs, the Treasury Department's payments in pensions to military retirees and widows and their families, interest on debt incurred in past wars, or State Department financing of foreign arms sales and militarily-related development assistance. Neither does it include defense spending that is not military in nature, such as the Department of Homeland Security, counter-terrorism spending by the FBI, and intelligence-gathering spending by NASA.</i><p>Military expense is a MONSTER that just grows and grows and grows.<p>ps. The costs for the Iraq and Afghanistan war are technically done outside the budget and through borrowed money. The INTEREST on them alone is over $500 Billion<p><a href="http://www.usatoday.com/news/military/2007-10-23-wacosts_N.htm" rel="nofollow">http://www.usatoday.com/news/military/2007-10-23-wacosts_N.h...</a>

Fixing Social Security - it's always up for discussion and nothing ever gets done about it. The frustrating part is that the solution is somewhat simple, but politically it's untouchable. Here's my quick &#38; simple solution for the problem:<p>1) Phase out Social Security benefits if your income level hits $50k that year. - This aspect of Social Security is perhaps most baffling - why does someone who is making $250k a year on their pension and 401k distributions getting the same amount of Social Security as someone who's destitute and barely getting by? "But I paid into it, I should get something out of it!" goes the argument by rich people. Really? I pay into my car insurance every 6 months, never been in an accident, and I don't get a refund check when I'm done driving! Social Security is insurance, it's not a deferred savings plan. Social Security is really called FICA, and the "I" stands for insurance. It's insurance in case you don't have enough money to survive in old age, and the benefit payouts should reflect that. Someone making over 100k a year doesn't need another 25k a year in Social Security benefits to survive.<p>2) Take away the cap on contributions. Last year any dollar you made above $106k wasn't taxed at the 6.2% FICA rate. Why?<p>3) Make the Social Security Administration an independent entity free from Congress's whims, and more importantly, free from Congress's hands dipping into its pockets every time they need cash. Social Security <i>should</i> have a huge surplus right now in cash, as over the years they've always had more pay-in than pay-outs. Too bad Congress took all that money and spent it. Social Security is full of government bonds right now, essentially IOU's from Congress that "we promise to pay you back".<p>Combine #1 and #2 and you have a simple solution to both decrease payouts and increase pay-ins. Add #3 and you're assured that this institution (which isn't some evil socialist creation but really should be thought of as "poverty insurance") can be a self-sustaining, solvent part of our country forever.

Please note: Romer writes about "dealing with the LONG-RUN budget deficit". The short-run deficit MUST be high right now.<p>In the current policy debate, debt is often invoked as a reason to dismiss calls for expansionary fiscal policy as a response to unemployment; you can’t solve a problem created by debt by running up even more debt.<p>It assumes, implicitly, that debt is debt -- that it doesn't matter who owes the money. Yet that can't be right; if it were, debt wouldn't be a problem in the first place. After all, to a first approximation debt is money we owe to ourselves. The overall level of debt makes no difference to aggregate net worth -- one person's liability is another person's asset.<p>The level of debt matters only because the distribution of that debt matters. Borrowing by some actors now can help cure problems created by excess borrowing by other actors in the past. Deficit-financed government spending can allow the economy to avoid unemployment and deflation while highly indebted private-sector agents repair their balance sheets, and the government can pay down its debts once the deleveraging crisis is past.

To a large extent, the focus on Social Security budget shortfalls in these pieces is like the punchline in the joke about why the drunk guy is looking under the lamp post for his keys when he lost them in the alley: "Because the light is better here." Rising Medicare/Medicaid costs are a much bigger long-term budget issue than Social Security, but coming up with realistic-sounding proposals to improve Social Security's fiscal status is relatively easy (and less politically radioactive) compared to controlling medical costs.<p>Still, I think that blog post really drops the ball by not even mentioning Medicare/Medicaid as budget problems.

Some numbers in this analysis are a bit misleading - if you view the budget as "social security, defense, and everything else", the huge portion of the budget taken up by Medicare and Medicaid is papered over. Medicare+Medicaid is $788b, more than Social Security, and is similarly "untouchable". (source: <a href="http://useconomy.about.com/od/fiscalpolicy/p/Mandatory.htm" rel="nofollow">http://useconomy.about.com/od/fiscalpolicy/p/Mandatory.htm</a>)<p>Not to say that I think Social Security shouldn't be touched. I do think that as a matter of purpose, Social Security needs to be a defined benefit plan, even if we have to cut those benefits to some degree or another to make ends meet.

On the whole, this is a ridiculous article. No one except rich elites cares about the deficit (including the bond market: 30 year treasury notes are yielding 4.5% right now). Republicans may have made noises about it in the last election, but one of their major planks was that the Affordable Care Act cut Medicare benefits!<p>We are in the middle of a global economic contraction, it is not the time to be reducing spending (redirecting spending to useful infrastructure, sure).<p>The calls to cut Social Security are especially irritating. Thirty years ago, Reagan increased Social Security taxes to save the system. It worked, and the Social Security benefits are fully funded until 2037.<p>For 30 years, workers have paid extra into Social Security to keep it solvent long-term. Now a bunch of rich elites demands that benefits -- that they don't need, but millions depend upon -- be cut. That is a bait-and-switch of the highest order.<p>He doesn't even talk about Medicare, which is the real budget problem. You can tell if someone is serious about reducing the budget deficit if they have a real plan for Medicare.<p>Despite my disagreement on entitlement spending, I appreciate that he thinks military spending could be cut and tax rates on the wealthy need to be raised. Since he's wealthy, I appreciate that he is willing to make a personal sacrifice.

This is a terrible article. The heart of the projected deficit is increased medical spending -- if you don't deal with that, nothing else matters much, and vice-versa. Social Security is projected to be in balance for decades, then modestly out of balance for some time -- there is no rush to adjust it, and when we do the adjustment will not have to be dramatic, because although the expenditures are huge, so is the dedicated revenue stream. Finally, the "bipartisan" commission was bipartisan between rich centrist Democrats and conservative Republicans, and it foisted a deficit-increasing preference for reducing taxes on rich people into its report.<p>Fred Wilson, Paul Graham, Bill Gates, Larry Page, etc. ... these people are extraordinarily rich, in important ways the richest people the world has ever seen. Their perspective and interests do not and should not stand for the tech community, let alone the country or the world. The HN community could stand to be a little more skeptical of their pronouncements, and a little less slavish about enforcing the existing status hierarchy which upvotes every blog post they see fit to publish.

I can't read the comments for this article. It makes my brain hurt. Everything from 9/11 being an inside job to increase the national security net to the concept that the USA exists as a totalitarian empire.

<i>Our country continues to operate a defined benefits plan while most businesses have moved to a defined contribution plan.</i><p>A government-run defined contribution plan would almost certainly have to have some kind of guaranteed payment floor to be politically viable, which would encourage serious moral hazard in investing.<p>I also wonder how many companies can offer defined contribution plans because their employees are also automatically part of a defined benefit plan (i.e., social security).

He is wrong on the second count, nyt had an info thing some time ago where you could come up with a plan to balance the federal budget.<p>It was easy to do without raising taxes.

Right on.<p>As Fred Wilson points out this is partially a political problem: getting most people to agree to necessary changes.<p>It is tough to cut defense spending however. Throughout history the rich and powerful have become richer and more powerful through wars. The chances of the government acting in the best interest of our country is about zero.<p>Another way that the rich get richer is on the "war on X" where X can be terror, drugs, etc. I just heard a good lecture on how much illegal drug money gets money-laundered through Wall Street by the drug cartels. Good luck changing that.

Yes, the issues deficit hawks are raising are worth addressing in and out of themselves. But not because of deficits they generate!<p>What majority fails to understand and minority who understands it is too afraid to acknowledge is that for countries like US or Japan with independent monetary policy deficits truly don't matter. It's just another variable central bank deals with when executing monetary policy algorithm.<p>US public debt seems unsustainable to you? Go check Japan's debt (in reality it is japanese people savings)!<p>Japan's real problem is aging population, not its' World record public debt.<p>P.S. some good reading on WHY deficits don't matter:<p><a href="http://voices.washingtonpost.com/ezra-klein/2010/05/galbraith_the_danger_posed_by.html" rel="nofollow">http://voices.washingtonpost.com/ezra-klein/2010/05/galbrait...</a>

He is ignoring economic realties..<p>Basically, to get USA back on its feet we have to encourage industry to invest in hiring and consumers to reduce their own debt and produce savings.<p>By having the deficit this high it encourages those groups to make those economic choice as they are the best option as far as return on investment compared to other rates of returns..<p>When the employment, savings, and consumer deficit figures improve then you reduce the deficit.<p>That is not to say that parts of the budget do not need fixing, they in fact do..