Monday, November 15, 2010

Can you balance the federal budget?

Here's a graph of federal debt held by the public as a percentage of GDP, from 1970-2009:

With the exception of a few short years at the end of the Clinton administration, politicians have been unable to balance the federal budget for decades. The massive rise in U.S. national debt began under President Reagan as he cut taxes and raised defense spending. Now President Obama's National Commission on Fiscal Responsibility and Reform has proposed to reduce the budget deficit in the medium term (5 year) and balance the budget over the long run (27 years).

Can you do it? The New York Times has a fun little tool to let you try balancing the budget. I did it quite easily, in both the medium term and the long term—and then I just kept going. Through a mix of 70% spending cuts and 30% tax increases, I was able to give the U.S. a budget surplus of over $625 billion in 2030. Try it yourself. If you can't make decisions that balance the federal budget, don't get upset at politicians for being unable to do so. (Hint: Economists project that the long-term growth in federal spending comes mostly from increased entitlement spending as baby boomers enter retirement.)

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