Back in college, the final project for a large 20% of our economics class grade was to balance the federal budget. We’d download a 100 page PDF from one of the .gov websites and find the budget table somewhere in the last half.
At the time, the government was bringing in 2.4 trillion in (tax) revenue and spending 3.8 trillion. This was adding 1.4 trillion a year to the federal deficit. At the time, 9% of the year’s tax revenue was being spent on interest payments on the federal debt and that percentage was rising every year.
For the project, I remember cutting defense spending by 80% to 2x what China spends, cutting all discretionary spending by 1/2, and tripling excise taxes before I had close to enough to balance the federal budget.
I thought it was an interesting tool, thanks for sharing. But it's very opinionated in often bizarre ways, where it required choices all of which seemed bad and often all choices would increase the debt. For example, it asked which free college choice should we offer, there was no "none" let alone a "reduce government loan subsidies" option. So I stopped partway as this seemed more like a tool trying to push a specific policy agenda (maybe good or bad, depending on your perspective) than actually balance the budget.
I'm also not very sure a bunch of small changes can really work. It's likely big dramatic changes are necessary. For example:
- replace all social welfare programs with basic income that we can afford.
- replace all healthcare with a universal healthcare system that focuses on free human-less diagnostics and generic drugs and otherwise a free market. (It would be very cheap to offer this and it would be dramatically better for most).
- cut military budget by 50%, but let the military itself determine how to cut. I was in the Army. There is easily 50% of waste there, but it is everywhere and you would need to implement a culture of budget awareness (e.g. don't start your tank to heat a can of soup).
- reduce prison population 90% of it's current level. Once or twice a year, just order prisoners from "most releasable" to "least releasable", and release anyone over a threshold.
You might disagree with these implementations, and that is fine, but somehow it feels large changes like this are dramatically more likely than killing a million small programs without them coming back.
Not entirely so. See the counter at bottom left: “US Debt Held by Foreigners”. About 25% of the total. This is debt that can “come home” — as happened in the 70s:
Greece isn't a sovereign state. It's part of the EU. Very different than the USA which controls it's own currency. US debt in the form of treasury bonds just provides the private sector (usually wealthy) with an interest bearing checking account. US doesn't even have to sell bonds. In fact, it spends first and THEN sells bonds.
Sure, maybe Greece’s debt was denominated in Euros and Greece can’t print Euros.
But the US is in a different position because it has the world’s reserve currency. It maintains that position by simply depreciating less than all of the other major world currencies. If it looses that position, it would have disastrous effects on the purchasing power of the US relative to other counties.
What about UK, or Japan, or China, which don't have reserve currencies right? They run deficits just like the US. It turns out, if your economy has productive capacity, it isn't really a problem to print your own currency. Economies that have trouble are those that are strapped for HARD resources (real stuff).
Yeah this was one of the main points of the book IIRC. If you have a sovereign currency the idea of balancing your budget like a household isn't an apt analogy. If you belong to the EU, then you need to think like that. Makes the UK seem smart for insisting on maintaining the GBP, though personally I think Brexit wasn't a good move.
The point is that the US Government is more like a bank than a consumer. You put your money in, and expect to get your money back out. Your bank isn't in debt just because it owes its customers so much money. In fact a bank will owe customers more money than it has cash on hand, but it's not bankrupt.
The analogy is imperfect (as are all analogies), but it compensates for a lot of the issues that cause so much hand-wringing about the deficit. The more important observation is that inflation is low and so is the interest that the US government pays on new bonds (i.e. "deposits"). That means both that the situation is stable and that it's expected to remain stable for the foreseeable future.
There are more stabilizing steps to be taken in the future, and ideally they'll help lower the deficit and then the debt. But the OP's point is that it's not a crisis.
It's not a crisis, but it's also not a myth. That book is debated. The revenue generation (or savings) through that process is limited to about 4% GDP, but also causes inflation.
At the time, the government was bringing in 2.4 trillion in (tax) revenue and spending 3.8 trillion. This was adding 1.4 trillion a year to the federal deficit. At the time, 9% of the year’s tax revenue was being spent on interest payments on the federal debt and that percentage was rising every year.
For the project, I remember cutting defense spending by 80% to 2x what China spends, cutting all discretionary spending by 1/2, and tripling excise taxes before I had close to enough to balance the federal budget.