In it, I pointed out that we will take in $2,318B this year and spend $3,608B. To get to the point where we reduce the deficit, ie spend less than we take in so that we can pay back some of our borrowings, we're looking for more than $1,290B in annual spending reductions.
This is not some 10 year calculation as our politicians are talking about.
Every spending 'cut' package I've heard about recently talks of $2-$4 Trillion. That sounds big right? Well, no. It's over 10 years. $3 Trillion=$3,000 Billion divide by 10 years and annual spending is getting reduced by $300B.
Only another $1 Trillion or $1000 Billion to go. Each and every year. That would require d $13 Trillion package. Before we start paying back any of the debt we owe, which is another $14,500B (or $14.5 Trillion) (see the debt clock). If you wanted to be out of debt in 20 years, we'd need to run a surplus of $700B each and every year.
So, if you want to get somewhere, talk about changing federal spending from $3,608B to around $2,750B each year - less if you want to pay down the debt.
Below are some further thoughts on the sources of cuts and revenues, along with the possible consequences of acting insufficiently.
Accurate Reality: To get out of this mess, we've got to balance annual spending first. This means drastic changes in our expectations of the Federal government and huge cuts in expenditures. What we are seeing today is not even close, despite the media frenzy to what needs to happen. Assuming we balance the budget, then we should be able to avoid default, provided we also print and grow.
In May 2010, Niall Ferguson gave a great speech in which he explored the implications of public debt. He points out that throughout history serious political instability has resulted from public finance crises. Throughout history, national weakness and often fall has accompanied such political instability.
Without further change, it appears we are headed down that path.
We spent $1,421 Billion on Social Security, Medicare and Medicaid. 61% of all federal receipts were spent on these three 'safety net' programs.
We spent $1,421 Billion on Social Security, Medicare and Medicaid. 61% of all federal receipts were spent on these three 'safety net' programs.
Cutting requires electing responsible representatives to our democratic government who are willing to face changing Social Security, Medicare and Medicaid back to safety net programs; willing to reduce significant expenditures of blood and treasure on ill conceived overseas adventures; and remove the federal government from abusing its highly effective taxing capability to tax citizens and then give that money to other government entities, particularly States, to spend on programs and embarking on interceding in all aspects of American life simply because it can. Even with all these things done, cutting to a primary fiscal balance where expenditures are less than receipts probably requires additional taxation - although hopefully at the state level as the federal government exits numerous programs in many departments.
The Cato Institute has published a full page advertisement. In it they outline certain positions on cutting government spending. These positions are further elaborated at their site Downsizing Government. Their positions are a good start. I'll enumerate their positions and add a few.
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