Reduce the Deficit? Not So Fast.

Posted on February 23, 2010

Filed Under The Economic Scene

How difficult will it be to reduce the Federal budget? Far more difficult than almost anyone can imagine.

A story in the New York Times on Feb. 7, 2010, offered up a visual representation of the massive task facing the government. One look at that chart and you will see that virtually nothing this, or any administration, can do will make a dent, at least over the next few years.

The projected budget deficit for 2011 is $1.267 trillion, which comes to $4,100 per American.

What would happen if you completely eliminated two of the more popular targets of deficit hawks, the National Endowment for the Arts and all Congressional earmarks?

Not much, it turns out. We would still have a deficit of around $1.257 trillion! In other words, we would save “only” around $10 billion. That’s a pimple on a whale.

Fortunately, there does seem to be a growing consensus among main-stream economists that for a dynamic economy, such as the one we have here in the U.S., budget deficits do not seem to be as fearsome as once thought.

Nonetheless, most economists want the deficit reduced, as do most politicians. But it won’t get done with slogans. While finding areas to cut will be a monumental task, we cannot allow politicians to blithely call for cuts without offering highly specific suggestions.

Click below to see the original article, and be sure to click on the graph within the story.

http://www.nytimes.com/2010/02/07/weekinreview/07calmes.html?scp=1&sq=cut,%20snip,%20slash&st=cse

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COMMENTS

  • Ken Salzman

    I find it continually amazing that the anti-tax rhetoric has become so pervasive as to make any talk of tax increases politically incorrect. There are TWO ways to reduce a deficit: cutting spending and raising income. The incessant calls for tax cuts over the past 30 years, and particularly since 2000, are never looked at in terms of their effect on the overall economy. Personally, I am very much not convinced that cutting taxes spurs economic growth. In my state of Michigan, we have been cutting taxes steadily for nearly two decades and, at this point, we are ranking in the bottom few states of the nation. “Starving the beast” only works if the beast is not, in fact, the very creature you are trying to sustain. I’d like to hear as many proposals for where and how taxes might be raised to mitigate the deficit as there are proposals for programs to cut.