Tag Archives: Tax cut

A puzzle to solve the federal budget deficit

Did everyone see the budget deficit puzzle published in the New York Times? While the nation’s deficit problem is not specifically on the topic of water issues, how Congress addresses the problem will affect many things — including environmental programs and repair of aging water and sewer systems.

This New York Times puzzle is quite different from most puzzles, because there may be numerous right answers — or at least numerous ways to combine spending cuts with tax increases to reach a balanced budget.

As Fareed Zakaria pointed out in his latest CNN program “GPA,” one can’t solve the long-term deficit puzzle without addressing both taxes and spending. Go to the puzzle and try cutting services alone. Then try raising taxes alone. The exercise gives you a chance to see how serious people are approaching the problem.

The budget deficit puzzle may not contain all possible ideas. In fact, New York Times editors say they may refine the puzzle in the future. But there is no doubt that the issue is important, as Zakaria says in his commentary:

“The problem is very simple. Americans have an appetite for government benefits that greatly exceeds our appetite for taxes. For over a generation, we have closed this gap by borrowing — lots. But over the next decades that becomes impossible… “

He goes on to discuss briefly the Fiscal Reform Commission, which recently issued a report addressing both spending cuts and tax increases. Zakaria concludes:

“The greatest danger is not in the economic realm. There are answers in the economic realm. It is in the political realm. The political system is geared to destroy exactly such centrist proposals, because the left and right tear it apart from each side, the moderates run scared, and the problem remains unresolved.”

Zakaria offers his own solution to the deficit puzzle. You may be surprised by some of his choices. But please try to solve the puzzle yourself before looking at his solution.

The New York Times analyzed the solutions put forth by 7,000 people who solved the puzzle and linked their answers to their Twitter account by last Thursday.

These are the most popular ideas among that group:

  1. Reduce military to pre-Iraq War size; further reduce troops in Asia, Europe.
  2. Allow Bush tax cuts to expire for $250,000-plus incomes.
  3. Reduce Social Security benefits for those with high incomes.

These were the least popular ideas:

  1. Allow Bush tax cuts to expire for incomes below $250,000.
  2. Exempt first $5 million of estate taxes (Lincoln-Kyl proposal).
  3. Increase the Medicare eligibility age to 70.

If Congress tries to balance the budget in one or two years, it could delay the jobs recovery — unless something is done to stimulate business investment, according to economists. As Zakaria points out, it’s a complicated problem not solved through political rhetoric.