Let's look at the parts -
Social Security, Veterans benefits, and other major entitlement programs are set up to TRAIL the inflation which is underestimated by the Consumer Price Index. With a fixed percentage for social security, and a progressive income tax, even modest inflation will help cover these expenses.
However, right now there is little or no movement of prices upward.
The entitlements and non-discretionary spending are large, however there are still large areas that can be cut -
See this for details -
en.wikipedia.org
Discretionary -
1a) Defense
Room to cut here, and cuts have already been made in the F-22 program, for example. Also submarines, helicopters, etc.
1b) Iraq and Afghanistan Operations Afghanistan can be wrapped up and becoming part of China's expanding sphere of influence and responsibility. ;-)
2) Health and Human Services This excludes social security, and includes various welfare schemes. There are about 20 million illegal aliens (not just 13 million). Many of them can be pushed off these programs or caused to leave the US.
The rest of the people receiving welfare vote very little.
(the Social Security / Veterans people vote heavily)
So a large piece of this can be cut. The demand for these services will also drop with lower unemployment from even a modest economic recovery.
3) Stimulus Money A lot of this should be one time, GM should not need another bail out. Political will needs to be exerted to keep these hand outs from becoming permanent.
4) All the rest of the Federal government - another 300 Billion slice of pie, that can be trimmed about 15 Billion or more. Probably cut Housing since we have plenty of houses ;-)
With these cuts, the deficit could go from 1,200 Billion down to about 500-400 Billion. Selective additional tax increases could cut this down to around 300 billion, which can be easily financed. The rest of the world has an appetite for about 300 billion in US Debt each year.
When the deficit goes below 200 Billion, it will be harder to raise US interest rates, and the USD will have a tendency to appreciate as overseas money crowds into USD debt.
Another way of looking at the Deficit -
en.wikipedia.org |
