Big Picture: US Economy, boiling it down

One of the problems with our political debate is that it's easy to get lost in the complexity. I am going to take a stab to try to boil down the argument to just a few puts and takes. Of course, such an exercise is destined to fail on some levels, but the big picture matters, so let's try to find the big buckets and discuss the pros and cons of debiting or crediting each bucket.

First, it's clear our debt is too high - almost no one disagrees. Second, almost no competent economists think we can or should cut our debt too fast, as it will greatly slow the economy.

So, from that baseline - yes we need to cut debt, but not too fast - what are the big buckets to accomplish that?

Bucket #1: Cut Social Programs, especially Medicare
The GOP is laser-focused on cutting social programs as the sole means of balancing our budgets. It is true that these programs (especially Medicare) are a huge part of our spending, but what are the Pros and Cons of doing this?

Pros: It's a big bucket, so cutting it will indeed save money 

Cons: Cutting support for retirees and future retirees (who after all could not get insurance from the free market before Medicare) will cause immense pain for millions of Americans

Impact Score: Let's call this one massively painful depending on the level of cuts 

Bucket #2: Increase Taxes where we can
The Democrats are pushing back (much more firmly of late) on the GOP plan to balance the budget on the backs of the middle-class alone and pushing for a return to the tax rates for the top 10% of wage earners to Clinton-era levels (from a top rate of 35% to 39.6% - a massive increase of 4.6%

Pros: Certainly a small increase, as proposed by the Democrats of 4.6% for the wealthy, essentially returning the rates to Clinton-era percentages (a time of great growth), was not a dis-incentive to investment, it was one of the fastest expansions in GDP in our nations history. Raising this rate would create more than $4Trillion in income for the government that could be used to reduce debt

Cons: Careful attention to increasing taxes without slowing growth must be made. If increased taxes reduces growth, that would be bad of course, however most economists agree this is not likely on what is proposed, despite GOP demagoguery

Impact Score: If we do as Obama proposes, it's clear we can call this one manageable in terms of pain impact and to potential economic downsides

Bucket #3: Cut Defense Spending
A reduction of Defense Spending, which has skyrocketed of late is certainly achievable and broadly believed that it would not lower US defense readiness.

Pros: The budget is massive and has grown markedly over the past few years, so the potential is certainly there for positive impact if reduce 

Cons: Careful attention to increasing taxes without slowing growth must be made. If increased taxes reduces growth, that would be bad of course, however most economists agree this is not likely on what is proposed, despite GOP demagoguery 

Impact Score: If we do as the Defense department wants it won't have an impact, if we are bold and reduce it to reasonable amounts as a percentage of spend from a few key countries, this one is impactful and is unlikely to harm readiness. Time to get out of Afghanistan and Iraq for sure - even GOP lawmakers and candidates agree 

Conclusion:
Clearly cutting Social Programs is the most painful. Raising Taxes less so, and cutting defense spending also manageable. Clearly a balance between all three would lessen the impact of cuts in any program. If the choice is between raising taxes on a few tens of thousands of VERY well-off individual whose incomes have grown substantially over the past few years, versus cutting the social safety net for millions, it's a pretty easy argument that the cost of raising taxes is far lower than cutting social programs - isn't it.

Clearly the most rational outcome is spreading the pain around.

Why is that so hard for the insurgent GOP lawmakers to agree to? Could it be that by not agreeing things stay bad and that makes the GOP more confident they can eject Obama from office? Exactly. Cynical, but obviously true.

What's the opposite of Country First? GOP 2011