Where are we financially right now in terms of our deficit?

The deficit itself, as you may recall came about in two phases. The first was in the early 2000s, with unfunded wars, unfunded tax cuts, and unfunded prescription drug programs. It was then compounded in the later 2000s by a recession where millions of people lost jobs or pay and were no longer able to pay into the federal coffers, plus things like food stamps and unemployment insurance shot up. On top of that we had two stimulus programs, one for banks and one supposedly for jobs but about a third of which was more tax cuts. So, we went from a surplus in 2000 to a deficit of about $15 Trillion (and still counting) today. The costs of the wars will continue to rise for some years to come because of the need for on-going health care for wounded veterans. It is estimated that their care will cost about $1 trillion in “out of control spending” every three years for at least the next two decades.

So, where are we on tackling that decade’s deficit (assuming that we need to; that is not a universally held opinion)?

Through the December 31 fiscal cliff deal and the spring 2011 debt ceiling deal Congress effectively cut at least $1.5 trillion over the next decade. Not bad.

Add to that the $600 billion in new revenue raised in the fiscal cliff deal and the $700 billion in reduced Medicare spending passed in the Affordable Care Act. That brings it down by about $3 Trillion, which is not everything, but it’s not nothing. And the total will actually wind up being higher than that when the reductions in interest payments on a smaller debt are included. 

And finally, the deficit is also gradually coming down as more and more people are going back to work and beginning to pay taxes again. One of the reasons why the deficit became a surplus back in the dark days of the Communist, Socialist, reign of bill Clinton was that unemployment went down and the number of tax payers went up.

There is a clear correlation between the number of tax payers in a nation and the size of its national deficit. The more people paying taxes, the smaller the deficit (see this chart). Most, if not all economists would, therefore, argue that that the best way to tackle the deficit would be a balanced program that combines increasing taxes with increasing tax payers.

Unfortunately, according to the people in Congress who control the filibuster in the Senate and the "Majority of the Majority" rule in the house, it’s unlikely that either of these will ever happen. Instead of finding ways to share the burden equally (raising income taxes), what is being talked about (by both parties) is ways to put the burden of the deficit on specific groups. that means mainly old people, poor people and sick people (a.k.a. Social Security, Medicaid, and Medicare), with a few "loopholes" like damaging young families trying to buy a new home or parents trying to send their kids to college, or making old people pay taxes on their pensions.

What a wonderful system of government…