Can we get a serious budget plan?

Another year, another display of both parties' complete inability to propose any serious solution to the country's fiscal situation.

The Democrats have not passed a budget in years. They seem completely unwilling to do anything about the fact that entitlement spending (if left unchanged) will explode the federal budget in a decade or so. Whether faced with a budget deficit, a proposed spending cut, or a new program that they have no way to pay for, the leftists' solution is the same: "Tax the rich." The problem is, there just aren't that many rich people. There has been lots of talk about the so-called Buffett rule, which would ensure that everyone earning at least $1 million annually pays at least 30% of their income in taxes--but even the Huffington Post admits that adapting the Buffett rule would bring in only $47 billion over the next eleven years. That's about $4.3 billion per year, which is about 0.2% of the 2011 budget deficit.

We did, at one point, have a fairly reasonable center-left budget plan: the Simpson-Bowles plan. Unfortunately it was rejected, not by the Republicans, but by President Obama.

On the right, we have Paul Ryan's budget. It is perhaps a good conservative thought experiment, and it allows the Republicans to tell the Democrats, "Hey, at least we have a budget proposal." In reality, however, Ryan accomplished no more than he would have if he had proposed a budget plan for the Land of Oz. Besides being dead on arrival in the Senate, the Ryan plan seems unlikely to attract support from anywhere close to a majority of the American people.

The Ryan plan does not address the deficit at all in the short term (although a supply-sider could make the argument that his tax cuts could spur economic growth that would decrease the deficit). In the long term, Ryan would shrink all discretionary spending (everything other than Social Security, health entitlements, and interest payments) to 3.75% of GDP. Military spending (aside from Iraq and Afghanistan) is currently about 3.5% of GDP, and Ryan refuses to cut the military. So that leaves 0.25% of GDP for everything else: infrastructure, border patrol, federal law enforcement, food and water safety, veterans benefits, the safety net, etc. While non-military discretionary spending does need to be cut somewhat, slashing it from its current level (about 3.5% of GDP) to 0.25% is simply ridiculous.

One could imagine a center-right proposal, combining revenue-neutral tax reform with some cuts in discretionary spending and measures to stop the runaway growth in entitlements. But nothing like that has ever been proposed.

Right now, it is clear that Congress and the White House care much more about making political statements, upholding pledges, and sticking it to the other party than they care about actually governing the country.

GOP, conservatives need to get priorities straight

Going into the election year of 2012, major polls (see here and here) highlight two issues as most important to voters. One is the economy (which includes unemployment/jobs) and the other is the budget deficit. The wave of Republicans who came into Congress in 2010 attempted to address these issues by insisting on spending cuts to reduce the deficit, resisting tax increases for fear of further damaging the economy. A number of bitter deadlocks ensued as President Obama insisted on tax increases and repeatedly balked at cutting spending.

Now, Obama has finally come up with $500 billion in spending cuts--but rather than celebrate, the editors of conservative magazine National Review attack him viciously. The reason? Obama wants to cut the Pentagon budget. In attacking the cuts, National Review calls Obama's plan a "retreat" and pulls out all the usual neocon arguments. They scold Obama for trying to return troop levels to where they were at the end of the Clinton administration--which was not coincidentally the last time we had a balanced budget.

Here is one quote: "At its Cold War peak, U.S. military strategy called for the peacetime ability to simultaneously fight and win two major theater wars and a “brushfire” conflict. The years after the Soviet collapse saw that capability pared down in the name of the “peace dividend,” just in time for the 9/11 decade to deliver . . . two major theater wars and a series of “brushfire” conflicts... But the president draws precisely the wrong conclusion from the challenges of those conflicts. Faced with our struggle to fight up to our own standards, he has elected to lower the bar."

Well, if "lowering the bar" means that less Americans die fighting for dubious causes in wars like Vietnam or Iraq, and our deficit is reduced as well, then I'm all for it. It seems to me that Obama drew exactly the right conclusion: don't start a war without an imminent threat to America and don't engage in prolonged nation-building.

Conservatives really need to realize that we can't do it all. We can't balance the budget, keep taxes low, maintain our infrastructure, keep an acceptable safety net, and continue even a stabilized version of Social Security and Medicare while continuing to act as the world's lone policeman. Not only that, but unless Republicans are willing to cut their favored programs, it would be disingenuous to ask Democrats to do the same.

Supercommittee proposal would raise $500 billion in new revenue--but Democrats reject it

According to the Wall Street Journal, Pat Toomey and the five other Republicans on the Congressional "deficit supercommittee" recently proposed a plan with $750 billion in spending cuts and $300-500 billion in new revenue over 10 years. Under the plan, tax rates would be cut--the top rate would fall from 35% to 28%, and rates from other brackets would be lowered proportionally. However, the plan more than makes up for it by severely limiting deductions, very similar to a bipartisan tax reform measure that was enacted in 1986. The Joint Tax Committee determined that even with no economic growth, the tax changes would raise $300 billion in tax revenue over the next decade. (An additional $100-200 billion would come from changing the way tax brackets are adjusted for inflation.)

Democrats, however, rejected the proposal. And one can only wonder why. There were no cuts to Medicare or Medicaid. The 1.5 to 1 ratio of spending cuts to revenue increases is better for the Dems than the 3 to 1 ratio promised by the Simpson-Bowles plan.

It could be that Democrats see lower tax rates as symbolically intolerable, even if the rich (who reap most of the benefits from tax deductions) would actually pay more under the new plan. Or, it could be that they see "compromise" as a 1 to 1 ratio of spending cuts to revenue increases. In that case, it seems the Democrats would have rejected Simpson-Bowles as well, unless (as some conservative critics claim) it was a bluff containing spending cuts that would never materialize.

Either way, Democrats have just defeated a plan that provided the "balanced approach" to deficit reduction that they keep clamoring for. And by eliminating deductions, it would have made the tax code more fair and helped to curb special interest power as well.

Fiscal Chicanery Fails: Obamacare's CLASS Program to be Suspended Indefinitely

During the debates on Obamacare, one of the major talking points for supporters was that "Obamacare will cut the deficit." The Congressional Budget Office (CBO) released estimates showing that Obamacare would cut the deficit over the period from 2010 to 2019. To me, however, this seemed to contradict common sense. How could a massive entitlement program actually cut the deficit without equally massive tax increases?

Well, one of Obamacare's gimmicks was exposed on October 14. The CLASS Act, a long-term care insurance program, was set up to charge participants for at least five years before they became eligible for benefits. It was estimated to create a $70 billion surplus for the first ten years, which could be used to pay for Obamacare and contribute to the program's so-called deficit savings. Conveniently, the CBO only projects the fiscal impact of legislation for the first ten years.

The problem is, of course, that after ten years or so, all of the people who had been paying into the system for five years would start receiving benefits. And healthy people would have no incentive to sign up for CLASS; it would only attract participants who expected to draw significant benefits. It was a budgetary time bomb. Democratic Senator Kent Conrad called it "a Ponzi scheme of the first order, the kind of thing Bernie Madoff would have been proud of."

And it seems like the White House has been forced to admit that Conrad and other critics of the program were correct.

Ten years after 9/11, has anybody won the war on terror?

With the tenth anniversary of 9/11 approaching, it's safe to say that Al-Qaeda has lost the war on terror--after all, Bin Laden is dead and much of their leadership and global influence has all but disappeared. But the real question is, who won? New York magazine columnist Frank Rich argues that America is suffering from a number of problems today that can be traced directly to our government's response to 9/11. And if you can look past a few of Rich's more partisan comments, I feel that overall he makes a good point. It could be that the war on terror, like Vietnam and WWI before it, has been a conflict with no real winner.

9/11 had the potential to unite us, and for a short while it did. But eventually, as Bush started using it as an excuse to invade Iraq, the unity died. Instead, one was either with the White House or with the terrorists. Many have accused the mainstream media of cheerleading the war and not providing a balanced analysis of the rationale for the invasion. People who criticized the president or the Iraq War were attacked as "unpatriotic." Instead of unifying us, the Iraq invasion and its aftermath seems to have ignited the bitter partisanship that now seems to pervade Washington. Before Iraq, Democrats and Republicans could actually work together. Now, any politicians who attempt to compromise are viewed by their base as "surrendering." Bashing the president was not nearly as popular in the media before 2003 as it has been in the past eight years, no matter which party has controlled the White House. Trust in government has plummeted to all-time lows.

Perhaps a bigger problem was, as Rich puts it, the war was fought by a "largely out-of-sight, out-of-mind" army and paid for by a "magic credit card." As support for the war waned, the military resorted to widespread dishonest recruiting and unprecedented use of stop-loss policies to keep up troop levels. Washington also thought that they could pay for the war almost entirely through deficit spending. Taken together, the Iraq and Afghanistan wars, the continuation of the Bush tax cuts, and the Medicare prescription drug entitlement are responsible for the majority of our national debt at this point, and played a huge role in the S&P credit downgrade.

The war on terror has clearly been a defeat for Al-Qaeda. But with bitter partisan divisions, massive debts, and a seemingly endless conflict in Afghanistan--all a result of the war on terror--can we really say that we have won?

A good 8-point plan to fix politics (that will never happen)

The Daily Beast today outlined a pretty good 8-step plan to fix most of what ails American politics. (Of course, the special interests and party leaders would never let something like this happen). I would say that 5 of the 8 points are spot on, and 2 of them need only minor tweaks. Here is their nifty flowchart that describes the plan. In a nutshell, it consists of:

1. Independent redistricting.

2. A nationwide "clean elections" system. (My objection: This is probably unconstitutional. A better idea would be strict limits on campaign donations for all organizations, but no limits on donations from individuals).

3. Nonpartisan primaries: all candidates on the same ballot, top two advance.

4. More states committing to give their electoral votes to the winner of the national popular vote.

5. Fill vacancies in legislative committees randomly. (My suggestion: Require every committee to be evenly divided between Republicans and Democrats. Committees should not be tools of partisan power).

6. Eliminate the provision where senators can anonymously place holds on bills. 

7. Force filibusters to happen via actual on-floor debates.

8. Eliminate the debt ceiling. (My objection: It would be a bad idea to eliminate the last line of defense against out-of-control, over-budget spending. A better idea would be to pass a balanced budget amendment that also mandates a significant tax increase whenever the U.S. gets involved in a war).

What to make of questionable comments from GOP candidates

Last week was not a good one for GOP sound bites. The leading candidates made a couple of statements that, if interpreted a certain way, could lead one to wonder if the party is careening off an ideological cliff.

First, during the GOP debate, every single candidate said that they would walk away from a deficit deal that had $10 in spending cuts for every dollar in tax increases. That is absolutely crazy. Anyone who would actually veto that deal has no business running for president. It's extremely unlikely that they would get a deal that was even that good. Do they think Democrats are just going to disappear? Do they not realize that those ten dollars in uncut spending will mean higher taxes later on? Would they really turn down a chance to substantially reform entitlements and move closer to long-term fiscal health in exchange for, say, ending the Bush tax cuts?

Like the author of the above article, I think that the mainstream candidates in the debate were most likely lying, and simply pandering to the hard-liners in the GOP base. Their statements are thus mostly an indictment of a primary system that is dominated by the radical wing of each party and forces candidates to throw red meat to their base, whether they truly believe what they are saying or not.

Secondly, Mitt Romney proclaimed at the Iowa State Fair that "corporations are people." Again, there are two ways of interpreting this. It could mean simply that corporations are made up of people, and as Romney said, all the money that goes to corporations eventually goes to people. It could, however, also mean that corporations deserve the same constitutional rights as people, an interpretation which the DNC is already using to attack Romney. This is a policy position that was unfortunately legitimized by the Supreme Court in the Citizens United case--in my opinion, one of the most destructive decisions in recent history.

As I stated in my first post, businesses are more akin to governments than to individuals; they are collective organizations which increase overall wealth, security, and efficiency but must be carefully monitored and limited lest they usurp the power of the people. The Citizens United case gives corporations (and unions) undue power over the political process, and Republicans who actually believe that "corporations are people" risk being labeled as protecting corporate fat cats at the expense of ordinary people.

Bush and Obama: More similar than different

Obama is (deservedly, in my opinion) taking a lot of heat these days for the debt crisis and the down economy. One of the classic responses from left-wingers trying to defend Obama is "Well, would you prefer Bush?" In some ways, that is a good point. More fundamentally, however, I feel like it misses the point. If you look past the "R" and "D" labels, Bush's and Obama's presidencies are really more similar than different. Obama is not really a liberal, although he does lean left; nor was Bush really a conservative, although he leaned right. They are both statists, dramatically expanding the power and the role of government. And both their administrations were characterized by grossly irresponsible spending and heavy-handed policies that backfired.

During Bush's eight years in office, the national debt ballooned from $5.7 trillion to $10.6 trillion--an increase of nearly $5 trillion. During Obama's 2.5 years in office, the national debt grew from $10.6 trillion to $14.5 trillion--an increase of nearly $4 trillion in about one-third of the time. However, Obama has done his borrowing in a historically bad economy, when some amount of deficit is acceptable or even advisable so as to allow for pro-growth tax cuts or spending. Bush's borrowing was mostly during good economic times, when deficits are much harder to justify. In addition, some of Obama's spending was the result of the two wars he inherited from Bush. Conclusion? Bush borrowed a lot when he should have been borrowing nothing. Obama is borrowing a ridiculous amount when he should only be borrowing a little.

Besides spending like drunken sailors, both presidents seemed to believe that more power from the U.S. government is a good thing. Bush attempted to expand American global influence with bombs and guns. He started two wars that turned into long, deadly occupations, while continuing to believe that the people of Iraq and Afghanistan would somehow appreciate the American occupation and the heavy American influence on their new governments. Obama, on the other hand, seems to believe that he always knows better than the American people--whether it means forcing people to buy healthcare, preventing people from buying incandescent lamps, trying to tell companies that they can't open a factory in a certain state, or trying to prevent workers from having a secret-ballot vote on whether to unionize. Obama clearly does not see individual economic freedom as anything worth protecting.

So forget the "R" and "D" labels. We should not automatically associate all Democrats with Obama or all Republicans with Bush. The next president, regardless of party, needs to be someone who is as unlike either of them as possible.

Two views on balancing the budget

Esquire today presented a very interesting left-right juxtaposition: two articles by former senators Gary Hart (D-Colo.) and Bob Packwood (R-Ore.) about balancing the federal budget. Here is Hart's article and here is Packwood's.

So who's right? Well, neither. Or both. Hart understandably decries the failure to regulate financial markets. Hart also correctly points out that the Iraq and Afghanistan wars combined with the Bush tax cuts were not good for the deficit. Given that both the wars and the tax cuts have continued for more than a decade, at this point they are responsible for a huge chunk of the federal debt.

Now, the Bush tax cuts, by themselves, were not a bad idea. Hart's biggest mistake is his refusal to acknowledge that tax cuts can stimulate the economy--a strategy that is part of Keynesian economics and worked undeniably well under both Reagan and JFK. The problem is, if you cut taxes you need to restrain spending, and Bush did exactly the opposite. Here's an idea: pass a law that requires a tax increase for any military operation that continues longer than 10 days. That will keep deficits down, and it might make the trigger-happy contingent of the GOP (which thankfully seems to be in decline) less likely to push for war.

Packwood's article discusses the worrisome increase in total federal spending, with a particular emphasis on entitlements. He is right on there: unless something is done to stop the runaway growth of entitlement spending, deficits will explode in the next few decades. However, by failing to discuss anything besides entitlements, Packwood exemplifies a certain conservative myopia. If the GOP focuses too much on slashing entitlements and leaves everything else alone, they will lose election after election. It would almost take a Vulcan to not see it as unfair for seniors and Medicaid patients to have to make all the sacrifices. While restraining entitlements are essential, fiscal conservatives need to be just as willing to consider things like dismantling the American empire, eliminating foreign aid, cutting federal payroll, closing tax loopholes, and probably--in a decade or two--raising taxes in some form.

"Terrorists" rhetoric completely crossed the line

With the signing of the debt deal, perceived as favorable to the GOP and the Tea Party, a whole mess of nasty rhetoric has come out of the woodwork. You might expect a leftist blog to compare the Tea Party to terrorists. It's a bit more surprising when you see a New York Times columnist claiming that the Tea Party has "waged jihad on the American people." Still, it's only an op-ed column.

However, when the Vice President of the United States says that the Tea Party "acted like terrorists," that's pretty despicable. He was responding to an even blunter comparison from Rep. Mike Doyle (D-Pa), who flat-out said that a “small group of terrorists have made it impossible to spend any money.”

Look, I realize political debates can get heated. You could call the Tea Party Republicans obstinate, pigheaded, or extremist, and I might agree with you somewhat. You could talk about GOP hypocrisy for not cracking down on spending when Bush was in office, a perfectly valid argument. You could call them cruel and heartless or talk about their supposed allegiance to millionaires and oil companies at the expense of the working class. Fine.

But terrorists? Terrorists want to blow up buildings and trains and kill people, ideally thousands of people. The Tea Party wants to cut government spending--that's it. Some people have tried to argue that the Republicans were leading the country toward default with their reluctance to raise the debt ceiling. That is hogwash. The government would still have had more than enough money to pay interest on the debt. The only way a default could have happened is if Congress decided that paying some bureaucrats in the Department of Energy was more important. The worst-case scenario was a government shutdown a la 1995.

So seriously, enough with the crazy rhetoric, or there might be knife fights in the Capitol before the end of the year.

The debt deal: kicking the can down the road

So, after a months-long fight over raising the debt ceiling, we finally have a deal. But what did it accomplish? Not much, according to this Washington Post analysis. In the words of Sen. Lindsey Graham:

“It’s a $3 trillion package that will allow $7 trillion to be added to the deficit over the next decade. We’re no longer running toward oblivion, we’re walking toward it.”


In the best-case scenario the deal will only cut 6-7% of federal spending over the next 10 years. That is ignoring the fact that federal spending is slated to increase by over 50% over the same time period. Meanwhile, unemployment is as high as ever. As fights go, the budget battle was reminiscent of the War of 1812, which featured years of nasty fighting and then a cease-fire that basically just restored the status quo ante bellum. 


In general, I like divided government. When one party controls the House, Senate, and the White House, they tend to do things like send us into a protracted war without a clear objective, or an exit strategy, or a way to pay for it. The downside of divided government, however, was on full display over the last few weeks. With Democrats stubbornly refusing to cut or reform entitlements, and Republicans stubbornly refusing to raise revenue by closing loopholes or eliminating tax subsidies, there was little chance of achieving significant long-term deficit reduction. They also ignored the ongoing jobs crisis in their obsession with the deficit, refusing to consider more small business tax cuts or infrastructure spending that could help reverse unemployment. Indeed, the only compromise they could settle on was just kicking the can down the road. 

The GOP's Test: Reality or Ideology?

Although the debt ceiling fight is by no means over, John Boehner and Harry Reid have come up with two plans that avoid raising taxes, and either of them seems to be a realistic option. One obstacle in the way of a completed deal is President Obama, who continues to push for a tax increase. However, it is doubtful that Obama would choose to veto a plan that passed the House and Senate and thus expose himself to the majority of the blame for a possible credit downgrade or any other adverse effects of the budget stalemate. The other obstacle is a number of House Republicans who continue to insist on more aggressive spending cuts and refuse to eliminate special tax breaks.

This, argues the Wall Street Journal, would be a big mistake, and I agree. The Boehner and Reid plans are not perfect, but they satisfy the GOP's #1 priority (no tax increases) and seem like they have support in Congress. If House Republicans torpedo them, they play into Obama's hands, allowing him to blame the GOP for the budget impasse. They then might be forced to accept a tax increase in order to avoid suffering the political fallout of the debt limit not being raised.

This is somewhat similar to the situation that Obama and the Democrats faced in 2009-10. They came into office with an impressive mandate, and the GOP's popularity was at historic lows as a result of the disasters of the Bush administration. With a down economy, the Democrats had an opportunity to cement a long-lasting majority by taking a center-left approach that focused on jobs (particularly private-sector jobs) and financial regulation while perhaps also expanding the safety net. Instead, they went whole hog, driven by their ideology instead of by the reality of the situation. They passed a stimulus that contained some good programs and tax cuts but was also stuffed with pork, did nothing for small businesses, and in the end was largely a disappointment. Then, despite continuing high unemployment, they abandoned the focus on jobs and passed ObamaCare, a decades-long liberal dream, without a single Republican vote. Immediately afterward, new hiring almost stopped. The Democrats were crushed in the 2010 election.

If the Republicans want to keep any of the gains they made in 2010, they need to learn from this mistake.

Obama's Tax Hike Obsession

President Obama has been very adamant about including tax hikes in any budget deal. Congressional Democrats, on the other hand, seem to have settled for raising revenue by eliminating special tax breaks. If the congressional leaders come up with a plan that combines eliminating tax breaks with real, immediate spending cuts (as opposed to "future cuts" that may or may not happen), the Republicans would be stupid not to go for it.

However, the question still remains: Why was Obama so insistent on raising taxes? Pretty much every school of economics, and Keynesian economics in particular, says that raising taxes in a down economy is a bad idea. It seems like a more sensible argument for the Democrats would be that we need to keep up spending now in order to increase aggregate demand, and that we shouldn't worry about the deficit until the economy recovers.

However, it turns out that the Democrats' eagerness to raise taxes has a simple explanation: they want to spend even more. MUCH more. Three liberal think tanks devised 20-year plans to balance the budget and pay down the debt. On average, they want the federal government to collect 23.9% of GDP--15% higher than during World War 2.

This article from Reuters has all the gory details.

The rise and decline of the welfare state

As this Weekly Standard article explains very well, most of the core programs of the welfare state were established in the 1930's or 1960's, times when the life expectancy in America was well below 70, and lifesaving but expensive treatments for cancer, heart disease, and organ failure were still somewhat rare. At the beginning, entitlements such as Social Security and Medicare were the result of good intentions and the knowledge that the costs would be relatively low. They had no way of knowing that one day it might get too expensive. Perhaps more importantly, they had no way of knowing that any attempt to deal with increasing costs by limiting benefits or raising the minimum age would be rejected out of hand by leftists as "greedy" and "mean."


This quote at the end of the article provides a good summary of the issue:

"Pensions and access to health care remain social goods that a decent society will try to provide to its people. But goods are not rights."

The distinction between social goods and rights is an important one. It is important for an advanced society to ensure some minimum standard for its people, such as a minimum wage, a standard workweek, and basic/emergency health care. But these are not rights, and when people begin to insist on equal health care or generous benefits for all, they find that it soon becomes prohibitively expensive. 

America is Tuning Out Obama

In a Wall Street Journal article, Michael Goodwin of the New York Post talks about how he has stopped paying attention to Obama's speeches:


"He is the Man Who Won't Listen to Anybody, so why should anybody listen to him?"


"There is not a single example on domestic issues where he voluntarily staked out a spot in the American middle. . .  Obama's default statist position remains unmolested by facts or last year's landslide that was a rebuke to his first two years. He continues to push bigger and bigger government, higher and higher taxes and more and more welfare programs."


On Monday, a CBS News correspondent asked Obama how he was going to convince people that the debt ceiling needs to be raised (despite polls showing that 69% are against it). Obama's response?


"Well, let me distinguish between professional politicians and the public at large. The public is not paying close attention to the ins and outs of how a Treasury option goes...We're paid to worry about it."


Great. When the public disagrees with him, Obama's default response is "Well, we know better than them." No wonder people are tuning him out.

IBD/TIPP Poll: 70% of Americans oppose raising the debt ceiling

A large majority of Americans are telling Congress not to raise the debt ceiling. The 70% figure includes 86% of Republicans, 74% of independents, and even 55% of Democrats.

If the Debt Ceiling is Not Raised, We Can Still Survive. We Can Even Keep Social Security and Medicare Untouched.

A great article from American Thinker that shows one possible way to balance the budget if the debt ceiling is not raised, without defaulting, and without cutting Social Security, Medicare, or military pay. And since we're talking about this year's spending, with revenues already in, any revenue increases would be irrelevant here.

A couple key numbers:

The Office of Management and Budget (OMB) estimates that FY2012 revenues (starting Oct. 1, 2011) will be $2.6 trillion. That is more than the federal government spent in any year prior to 2006.

Since 2006, federal spending has risen to $3.7 trillion, a mind-boggling 29.5% increase in spending.

How does this author balance the budget? For one thing, he cuts defense spending to 2005 levels, while leaving military pay untouched. He also eliminates foreign aid (why do we still give foreign aid?), cuts Medicaid back to 2005 levels, eliminates federal income security programs (welfare, food stamps, etc) except for disability and unemployment, and eliminates the Department of Education and the Department of Energy. He makes the point that neither department existed prior to 1980. Also, he points out that Department of Energy spending totaled only $429 million as recently as 2005, but has grown 50 times bigger in the past 5 years as a result of Obama's "green initiatives."

Do I like everything about this plan? No, I'd tweak the numbers a bit. I'd probably make modest cuts to Social Security and/or Medicare through means testing, preserve funding for federal financial aid to college students, and keep income security at 2005 levels instead of eliminating it completely. But the point remains: Even in a worst-case scenario where the debt limit is not raised, we can avoid Armageddon.

Why the obsession over the deficit?

Obviously, the national debt is something that needs to be fixed in the medium term. We can't just keep spending like drunken sailors and leaving future generations with the bill. However, with unemployment still a major problem, is this really the time to crack down on deficit spending?

Let me use an analogy here. Suppose you are the coach of a pro sports team. One of your star players comes to training camp out of shape and having gained 15 pounds, and on the first day of practice he slightly tears the meniscus in his knee. Clearly, the best course of action would be to first repair his knee, then after his knee has healed get him back into shape. It seems like the Republicans, however, believe that it is best to immediately get him back into shape and pray that the knee doesn't get any worse. Major budget cuts certainly won't help employment, and they might make it worse. Is it really the right time to start making deep budget cuts?

Of course, the question that remains is how to fix private-sector unemployment. I can think of a few possible ways:

1. Cut corporate income taxes, while closing loopholes.
2. Eliminate some of the regulations that are most burdensome and expensive for businesses.
3. Declare a one-year payroll tax holiday, or eliminate it altogether (since the payroll tax is basically a tax on hiring).
4. Implement a tax credit or subsidy for buying American goods.
5. Invest in maintaining American infrastructure (which the 2009 stimulus somehow failed to do).

Naturally, none of these are very popular with partisans on Capitol Hill. #1 and #2 are anathema to Democrats, while #4 would be a tough sell to Republicans. #5 is not likely to survive the political process without being turned into something more "glamorous" (like a new museum) that a representative can show off to people in his/her district. And that is probably why the economy has been in a slump for nearly three years now and Congress still hasn't implemented even a half-decent solution.

Warren Buffett: "I Could End the Deficit in Five Minutes."

"You just pass a law that says that anytime there is a deficit of more than 3% of GDP all sitting members of congress are ineligible for reelection."

The full story is here.