Update 11/14: For more background, see this accompanying NYTimes story: O.K., You Fix the Budget
Yesterday, The New York Times launched Budget Puzzle: You Fix the Budget, an easy-to-use online budget simulator that challenges participants to balance the US federal budget both short and longer-term. From the website:
Today, you’re in charge of the nation’s finances. Some of your options have more short-term savings and some have more long-term savings. When you have closed the budget gaps for both 2015 and 2030, you are done. Make your own plan, then share it online.
At first glance, this tool looks a lot more mature than the example I reviewed earlier this year (see: Los Angeles Budget Challenge: When Surveys Won’t Take No For An Answer).
The budget simulator assumes a projected budget shortfall of $418 billion (2015) and $1,355 billion (2030). It consists of a total of 32 measures, including 22 spending cuts and ten tax increases. Each measure lists the dollar value in projected savings to the deficit in 2015 and 2030. As participants select their preferred measures, an interactive graphic keeps track of and visualizes their choices. Seven of the 32 items allow the participants to choose between two or three different alternatives (e.g. raising the Social Security retirement age to 68 or 70 years), each yielding a different savings impact.
I plugged all 32 measures and their respective dollar impact into a spreadsheet for some quick analysis. To keep things simple, for the seven measures where the tool gave options only the alternatives with the biggest savings impact were considered.
Below a few observations that I found noteworthy.
1) Total impact
The maximum savings impact from all 32 measures combined is $1,142 billion in 2015 (273%) and $3,172 billion in 2030 (234%). That means the tool allows roughly 2.5 times more savings than necessary (Los Angeles was less than 1.5 times). This is good! All things being equal, the higher this factor the more viable combinations can be found to balance the budget.
For reference, a factor of <1 means the budget is impossible to balance. A factor of 1 means there is no choice (no measure can be avoided in order to balance the budget). A factor of >2 usually means there are at least two entirely different solution approaches possible.
2) Total impact by type
Balancing budgets usually comes down to only two types of measures: spending cuts and revenue increases. This example includes 22 spending cuts with a total impact of $473 billion in 2015 (113% of deficit) and $1,751 billion in 2030 (129% of deficit) and ten tax increases with a total impact of $669 billion in 2015 (160% of deficit) and $1,421 billion in 2030 (105% of deficit). That means a balanced budget can be achieved in either year working purely the cost or the revenue side (something that wasn’t possible in the Los Angeles example where less then 75% of the projected deficit could be balanced by relying on one of the two types alone).
3) Short-term vs. long-term impact by type
It appears that in aggregate, spending cuts and tax increases impact the 2015 and 2030 deficits differently. While all ten tax increases together save 160% of the 2015 deficit, they only cover %105 of the 2030 deficit. Vice versa, while all 22 spending cuts save %113 of the 2015 budget, they cover %129 of the 2030 deficit.
Out of the 10 measures with the highest impact towards 2015, eight are tax cuts. Out of the 10 measures with the highest impact towards 2030, only 5 are tax cuts.
4) Top measures by impact (2015)
The following nine high-impact measures with regard to balancing the 2015 budget can be avoided by choosing all other 23 remaining measures:
- The Bush Tax Cuts: Allow expiration for income below $250,000 a year: $172B (41.1%)
- Eliminate loopholes, but keep taxes slightly higher: $136B (32.5%)
- Reduce the number of troops in Iraq and Afghanist to 30,000 by 2013: $86B (20.6%)
- Bank Tax: $73B (17.5%)
- Estate Taxes: Return the estate tax to Clinton-era levels: $50B (12.0%)
- Payroll tax: Subject some incomes above $106,000 to tax: $50B (12.0%)
- Millionaire’s tax on income above $1 million: $50B (12.0%)
- National sales tax: $41B (9.8%)
- Reduce the tax break for employer-provided health insurance: $41B (9.8%)
- All remaining 23 measures: $443B (106%)
This is an important thing to look at when reviewing budget simulators, and the Budget Puzzle does pretty well. The shorter this list, the fewer of these high-impact measures are actual choices or can even become hidden mandates (one of my main criticisms of the Los Angeles example). If reality dictates little choice, at least the budget simulator has to present these conditions transparently.
5) Top measures by impact (2030)
The following five high-impact measures with regard to balancing the 2030 budget can be avoided by choosing all other 27 remaining measures:
- Health Care Cap Medicare growth starting in 2013: $562B (41.5%)
- Tax Reform Eliminate loopholes, but keep taxes slightly higher: $315B (23.2%)
- Tax Reform National sales tax: $281B (20.7%)
- Existing Taxes The Bush Tax Cuts: Allow expiration for income below $250,000 a year: $252B (18.6%)
- Social Security Raise the Social Security retirement age to 70: $247B (18.2%)
- All remaining 27 measures: $1,515B (111.8%)
Again, pretty good. No apparent automatisms here.
6) Impact by category (2015 / 2030)
Another way to look for potential bias is to examine each of the six budget categories for size and short vs. long-term impact (in parenthesis the percentage of the budget deficit each category covers):
- Domestic: $147B (35.2%) / $166B (12.3%)
- Military: $191B (45.7%) / $349B (25.7%)
- Health Care: $86B (20.6%) / $836B (61.7%)
- Social Security: $49B (11.7%) / $400B (29.5%)
- Existing Taxes: $304B (72.7%) / $502B (37.1%)
- Tax Reform: $365B (87.3%) / $919B (67.8%)
Again, it seems that the measures offered are pretty balanced overall. Or at least I’m not able to detect any obvious bias towards any one category.
7) Quoting your sources
Obviously, budget simulators can only provide a very simplified picture of the world in order to remain usable and still fit on one page. At least the Budget Puzzle mentions the sources upon which its numbers and calculations are based:
Sources: New York Times analysis of data provided by Alan Auerbach and William Gale; Committee for a Responsible Federal Budget; Tax Policy Center; Congressional Budget Office; Sustainable Defense Task Force; Cato Institute; Economic Policy Institute; National Commission on Fiscal Responsibility and Reform; Joint Committee on Taxation; Centers for Medicare and Medicaid Services; Social Security Administration
8. Straightforward handling, transparent display of results
It’s nice that the entire tool fits on one page pretty much. Each choice a participants makes is immediately reflected in the visualization at the top. None of the 32 measures are inter-related, meaning whether a participants selects a measure or not will not affect the impact any of the other measures have. I mention this because I’ve seen this happen elsewhere, and it makes for a confusing or even misleading user experience.
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I can’t speak to the quality of the data, the relevance and completeness of the measures offered, the accuracy of the predicted impacts etc. It would be nice to get a few testimonials from trusted experts from across the political spectrum to confirm the budget simulator is valid.
But all in all, a very nicely done tool to engage citizens around the complex issue that is the federal budget deficit.