The National Debt - Part 2

Yesterday I proposed we eliminate the national debt for our semiquincentennial (250th) birthday. That gives us 10 years. What would we need to do to do that? It's a huge undertaking. First, let's naively assume there were no major economic downturns and none of the actions we take cause economic repercussions that make us fail... you know, simple stuff.

I just want to see what the numbers would look like. To start, here are the numbers:

US Debt: $19.5 trillion
Deficit: $480 billion/year
Interest Payments: $413 billion/year (side note: I just realized we are basically borrowing our interest payment)
Approximate Interest Rate: 2.12% (side note: if this goes up much we'd be screwed too)

Well, the first thing would be we HAVE to cut $480 billion from the budget so we don't make the debt bigger. To get the debt to $0 in 2026 though we would need to cut the budget by an additional $2.2 trillion. Let's make the assumption that the economy and therefore government revenue grows at 2% a year. We would have to cut the federal budget from $3.7 trillion down to $1.8 trillion. A total cut of $1.9 trillion or 51% of the current budget.

That is... a lot. What would we have to get rid of to be able to do it? Here is a link with cool pie charts where I got my information [link].



Well, first let's look at mandatory spending. We'd have to cut of Social Security/Unemployment/Labor spending by 65% ($812 billion). Then we'd have to cut Medicare and health spending by 65% for another $640 billion. Cut half of "Other" ($29 billion), and that gets us a total of $1.48 trillion, which is most, but still not all of the cuts we'd need. Mandatory spending is 2/3 of spending though so that is the biggest chunk.

Moving on to discretionary spending, if we cut education ($73 billion), Medicare and health ($66 billion), Housing and Community ($63 billion), Social Security/Unemployment/Labor ($29 billion), and cut military spending by 25% that would get us to our budget of $1.8 trillion.

It is possible... Maybe not a good idea, and I suspect it would violate the "doesn't screw up the economy" assumption from the beginning, but those are the numbers we would be looking at. Again, I realize this plan is terrible and unfeasible. However, this is the kind of discussion we have to start having if we are going to avoid certain global economic melt down. If we spent 15 years we could do it with only 28% cut in Social security and Medicare. We just have to discuss it.

Economic belt tightening must happen as soon as possible and in a reasonable controlled, but significant way or we are toast.