http://www.boston.com/dailynews/310/...lready_:.shtml
Continuing deficits: Even if nothing changes, we'll add $2.3 trillion to the deficit in the next 10 years.
Privatize Social Security: $1 trillion to $2 trillion in transitional costs over the next 10 years. I don't think that includes the loss of the Social Security surplus, which hides another trillion or so in national debt.
Make tax cuts permanent: Another $1 trillion.
Afghanistan, Iraq: Currently about $100 billion a year not included in budget estimates.
Education and foreign aid initiatives: A few billion a year.
CAN ECONOMIC GROWTH SOLVE THE PROBLEM?
Short answer: No.
The FY 2005 federal budget is $2.4 trillion, including off-budget items such as Iraq. Roughly $400 billion of that is deficit spending.
US GDP is about $11 trillion.
Assuming taxation levels stay relatively constant, that means every $1 trillion in economic growth produces about $180 billion in additional government revenue.
Our current deficit is $7.4 trillion.
Over the next 10 years, everything above will add about $5.8 trillion to that, for a total 10 year hole of $12.9 trillion.
Debt payment on the current debt amounts to about $300 billion a year.
$5.8 trillion divided by 10 years amounts to another $580 billion a year.
So to eliminate the budget deficit and pay for Bush's proposals would require the economy to grow $3.2 trillion, or 29%, THIS YEAR, in order to cover the $580 billion average annual cost. Assuming it doesn't do that, the economy would have to grow by some much larger percentage in the next 10 years so that the averages balance.
That just covers new spending. In order to actually start paying down the $7.4 trillion in existing debt, the economy would have to grow even more. It would have to grow $1.6 trillion THIS YEAR simply to cover the existing debt payments.
We simply can't grow our way out of a hole this big.
WHAT CAN WE DO?
We can cut spending. But lopping even $400 billion out of the annual federal budget (enough merely to erase the current deficit) would essentially erase all discretionary spending.
We also can raise taxes. There were 227 million tax returns of all types filed in 2004. Hitting each of those for $1,762 more a year would erase the budget deficit.
That's an "ouch" kind of number. But it illustrates the magnitude of the problem. The longer we wait, the bigger the deficit gets, and the bigger that cost grows. Economic growth may help, but as I've illustrated, it's not going to solve the problem.
The responsible thing is to do a combination of all three. But cutting spending won't yield enough, nor will any reasonable rate of economic growth. The only way to address the deficit is to raise taxes, in combination with a near-ban on new spending.
That won't do the economy any favors in the short-term, but we've been living beyond our means for years. If we accept our responsibility and take care of the deficit, in the long term the economy — and us — will prosper.
Anyone think Bush will spend his political capital in this fashion?