National Spending

If you want to reduce or reverse the deficit the concept is simple, income has to exceed spending.

Enough economic growth could do both those things, but as discussed yesterday the likelihood of that happening is next to nothing, based on current economic conditions.  If it was to happen it would be great, but it isn't happening.

So why not just reduce spending enough to eliminate the deficit?  It would work if it was possible, but Government spending isn't a bunch of wild and reckless extravagance.  Most of it is tied into three areas, Defense, Entitlements or Debt service.

I include both Social Security and Medicare under entitlements although for some reason people don't want to, equating entitlements to "give-aways".  Since we contribute to those programs we have earned them, and we have meaning we are entitled to them.

To get enough reduction to meaningfully impact the deficit you need to consider the big contributors.  Of course the other areas need to be efficient but the numbers, even at zero don't work, and those programs are not about to be zeroed out any tie soon.

Interest on the National Debt is a large expenditure and it is growing as the debt increases and as interest rates climb.  This is not optional spending and the only way to reduce it would be to reduce the debt and/or the interest rates.  Interest rates have been at historic lows and they are starting to rise.  There is little we can do about this area without addressing the other areas.

Entitlement spending is the favorite area to cut except for the fact that the programs included are extremely popular with the public.  Some changes to social security and Medicare are probably needed,, but any change is going to face stiff opposition.  Other entitlement programs include popular things as well and while there is a general belief that we are giving away billions of dollars to people who don't deserve it, each program has survived multiple years of unfriendly scrutiny by hostile congressmen, so while some waste and abuse will exist, the programs themselves are not overly generous handouts.

Of course there is a factor that has led to some of the waste and abuse as we have reduced the federal workforce who would be charged with enforcement.  There is no desire to greatly increase that workforce so enforcement is reliant upon less and less cops on the beat.

Without a significant change to popular programs that would reduce spending significantly, there is simply no way entitlement programs can be reduced enough to eliminate the deficit.  In fact the deficit is over a trillion dollars and spending reductions are never going to fix that, although they could contribute.

The last significant area is national defense which is, to some extent, a sacred cow.  Expenditures here are increasing as we see little interest in balancing the spending against our budget situation.  There is certainly some opportunities for reduction here, but people serving in our military should not be hurt.  Defense programs are a double edged sword, since because they are American based they are economic boons for the areas where weapons are manufactured and they create jobs.  Reducing our overseas commitments is possible but delicate and not probably in the best interests of our national defense.

Spending, although a popular area to attack is simply not going to eliminate the deficit without sacrifices we aren't willing to accept.  In fact we have large spending needs related to infrastructure and border security that will increase spending as well as increases in the areas mentioned above.

That leaves only income as a possible solution.