

Ask HN: US Federal Deficit - What to do? - mdink

So while driving this morning, I had NPR on listening to US lawmakers give the typical run around about spending cuts. It seems like we are coming close to a dangerous stand still, which would obviously have dire consequences for the future of the US.<p>How come both sides can't seem to realize that when it comes to spending cuts EVERYTHING needs to get cut and unfortunately taxes need to be RAISED. No one wants to hear this - heck I don't want to pay more taxes. I also don't want to see gov agencies doing great things be cut severely, but the fact of the matter is that 14 trillion isn't going to go away quietly.<p>Now regardless of whether you think I am right or wrong in this assessment, I have continuously been impressed by the massive brain power behind HN and I am curious to hear people's thoughts on what needs to be done and why. If you are an international reader, feel free to share your outside perspective!
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gtlenz
The interactive map doesn't allow one to account for increased economic
growth. That's the argument behind supply side economics. There are two books
that best lay out an approach to fix the budget deficit by cutting taxes. I
know this sounds crazy, but I encourage everyone to give them a read. I've
also included JFK's speech to the New York Economic Club (He'd be with
Republicans today on fiscal issues). Even if you read them as a mental
exercise, it will help you understand why Republicans advocate cutting taxes:

JFK's address to the New York Economic
Club:[http://www.americanrhetoric.com/speeches/jfkeconomicclubaddr...](http://www.americanrhetoric.com/speeches/jfkeconomicclubaddress.html)

Econoclasts by Brian Domitrovic: (This book shows why when Bush 43 cut taxes
it didn't lead to growth. Mundell's policy mix is key)
[http://www.amazon.com/Econoclasts-Supply-Side-Revolution-
Pro...](http://www.amazon.com/Econoclasts-Supply-Side-Revolution-Prosperity-
Enterprise/dp/193519125X/ref=sr_1_1?ie=UTF8&qid=1298048013&sr=8-1)

The Growth Experiment by Lawrence Lindsey [http://www.amazon.com/Growth-
Experiment-Policy-Transforming-...](http://www.amazon.com/Growth-Experiment-
Policy-Transforming-
Economy/dp/0465027512/ref=sr_1_1?s=books&ie=UTF8&qid=1298048203&sr=1-1)

I don't disagree that spending is the main culprit of the budget deficit, but
there is a way out of our predicament that few if any are talking about.
Historically tax revenue is equal to about 18% of GDP. So in order to have a
balanced budget at 3.73 trillion we would need a GDP of 20.7 trillion . To
balance our budget, assuming no growth in spending, it would take 7 years of
5% growth. It would take 5 years at 7% growth and if we could get to 8%
growth, agreed to keep the budget at 3.73 trillion, in year five we could pay
300 billion of our national debt down. In my opinion, growth is literally the
only way out of our problem without devaluing our currency. The tax raises
necessary to fix our problem would choke off our ability to grow.

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curt
Even though its counter intuitive tax cuts work, but they have to be the right
kind. All these credits, temporary cuts, refunds don't do anything. Its the
flat rate lowering and tax simplifications that increase growth and revenue
because it alters long term behavior. A great recent example is Egypt, they
lowered their rate from 40% to 20% and doubled revenue while standard
forecasting said it would be cut in half. Other example are abound throughout
the former Soviet Bloc, you lower/simplify taxes you get more revenue.

In the US we spend more money complying and avoiding taxes then actually do on
the taxes themselves. Think about that. If you look at US government tax
revenue it's always about 18% of GDP no matter the tax rate. (Look it up, its
really interesting it's called Hauser's Law) So the only way the increase
revenue is to grow the economy and the highest correlation to economic growth
is how many billion dollar companies an economy produces each year. So
everything the government does should be centered around freeing start-ups to
become billion dollar companies. That means simplified regulation and the
removal of corporate welfare, both protect large companies from smaller start-
ups.

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schwabacher
The new york times had a really cool flash app that let you balance the
budget..

[http://www.nytimes.com/interactive/2010/11/13/weekinreview/d...](http://www.nytimes.com/interactive/2010/11/13/weekinreview/deficits-
graphic.html)

Here is how I did it:
[http://www.nytimes.com/interactive/2010/11/13/weekinreview/d...](http://www.nytimes.com/interactive/2010/11/13/weekinreview/deficits-
graphic.html?choices=wvxj35rc)

It isn't easy, but getting out of Iraq and Afghanistan and letting the Bush
tax cuts expire go a long way.

~~~
bhousel
Can't upvote this enough.. Back when this came out, I shared the link on
Facebook. It was interesting because I know a whole spectrum of very liberal
to very conservative people among my family and friends.

This exercise really opened a lot of eyes, and I saw people with very strong
political views start to change their minds about long standing beliefs. In
order to fix the deficit, we will need to put politics aside and accept the
best ideas from both sides.

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jhamburger
-Drastically cut defense spending (The cold war is over. We aren't getting into any dogfights or naval battles. Concentrate spending on urban/guerrila warfare.) -Reform social security and medicare -Cut where you can elsewhere

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mdink
Curious - Do you agree with 500 million for cyber security?

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turbojerry
Raise taxes, quickens deflationary collapse

Cut spending, quickens deflationary collapse

Print money (QE), hyperinflationary collapse

"Now, America's just another broke ex-super power looking for a handout and
wondering why." - Max, Dark Angel

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pzxc
If we only reduced spending to what it was in the year 2000, we could
completely eliminate the income tax. That's how much spending has increased in
the last decade.

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mdink
Update: Also I am curious to thoughts specifically on the $500 million for
cyber security. Too much? Too little?

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kongqiu
We should probably be spending more on cyber-security than for, say, making
sure our fighter jets are 3x better than anyone else's...

