In the short run the non-entitlement actions may have more bite. In the long run increasing the retirement age and decreasing the cost of living adjustment will be huge (both directly and because it will reduce borrowing and thus future interest on the debt, from lower principle and possibly lower interest rates because lending to the feds will seem less risky). Over decades it could easily move the federal fiscal situation from impending collapse to a steady reduction in debt as a percentage of GDP. It could (after a 15 or 20 years for the effects to ramp up even result in occasional surpluses.
In some ways it makes sense (fiscally and otherwise) to be far more "draconian" on entitlement reform, but the feds have created a situation where people planned there lives around these entitlements (and paid money in to them reducing their ability to save for their own senior years) and it would be too much of a disruption to yank the benefits away from people.
The exact fiscal improvement of the long term entitlement reform is hard to calculate, but it should be very large over time.
The non-entitlement changes should bring the deficit down over a hundred billion per year in spending reductions (more over time with inflation and economic growth, but then you'll need more to have the same impact on deficits), maybe another hundred billion in closed tax loopholes (but I'd want to offset that with lower rates), and a significant but hard to calculate amount of extra revenue that would be generated by the extra economic growth caused by lower simpler taxes, reduced regulation, and generally less government interference. Also there would be extra revenue from taxing drug sales (at least the income tax, perhaps also taxes along the lines of tobacco and alcohol taxes, but if they are added they should be kept modest, high tax rates will encourage a black market, and then extra spending on enforcement etc., I'd prefer to end or greatly curtail sin taxes, but its likely in practice that any legalization effort, at least on the national level, is going to include them.) |
