Sunday, July 3, 2011

Eliminating the deficit, what would it take?

"Annual income twenty pounds, annual expenditure nineteen six, result happiness. Annual income twenty pounds, annual expenditure twenty pound ought and six, result misery."

US Federal Revenue is about 2.2 trillion, expenditures about 3.5 trillion.

The only way to cut expenditures is to cut expenditures, there is nothing to debate there.

Increasing revenue can be accomplished through economic growth and/or higher taxes.

If expenditures are cut 5% per year for the next 5 years (nominal terms) and revenue increased 3.5% per year for the next 5 years (nominal terms), we no longer have a deficit.

To really eliminate the deficit, Republicans need to accept that defense spending needs to decrease, and Democrats need to accept that entitlement programs are an actuarial disaster already happening and need to be reined in.

Doubt it will happen, it's always easier to spend other people's money.

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