Somebody is fibbing about 20%, it's about 29%, but no matter. What most in Washington don't talk about is that we could actually eliminate the deficit without raising the tax burden or cutting spending significantly. In fact, we could eventually cut taxes by 15%, increase spending by 15%, and still have a balanced budget.
The dems proposed to increase spending by $700 billion and raise taxes by $400 billion. The republicans want to get things under control by halting the growth in spending, but we don't need to increase the tax burden at all and we could basically leave spending alone.
That's right, no real pain on either side.
Deficits in recent years have been around $300-$500 billion. These last two years it's doubled to about a trillion. Doubling the deficit in two years is ridiculous, of course, so we'll start by going back to 2009 spending levels. That leaves us about say $380 of deficit. About $200 billion of that is wasted on time spent dealing with too many taxes forms and rules. The tax code is over 70,000 pages:
A simple tax code, whether that's the fair tax, the flat tax, or whatever would save about $200 billion just in costs. About 14% of the cost of taxes we pay aren't government revenue, but wasted on running with an overly complex tax system.
By just simplifying the tax system and using 2009 spending levels as our baseline that leaves us with a $180 billion deficit, down from $1,000 billion. The simple tax system, sunroof like the fair tax, does more than just reduce the costs of compliance, though. Eliminating 70,000 pages of loopholes and exceptions for specific friends of politicians means that everybody pays what they are supposed to. With the fair tax, even drug dealers would pay since it's implemented as a sales tax and drug dealers buy stuff. So too people who make tips or buy corporate jets would all pay the simple sales tax. That easily makes up the final $180 billion. Balanced budget by doing nothing but bringing spending to 2009 levels and simplifying the tax code!
The deficit commission tried to have done savings from reducing the complexity of taxes and getting rid of loopholes, but unfortunately they got stuck on the $700 billion increase in deficit spending.
Now I said we could cut taxes, increase spending, and still have a balanced budge
t eventually. The thing is, we spend $450 billion, roughly a third of the entire budget, just paying interest on the debt. It's like if you paid a third of your salary making minimum payments on huge credit card balances. By the budget as outlined above, "extra" money from economic bubbles, etc. can go to debt reduction. As you get rid of debt, that frees up a third of the budget dor tax cuts or anything else we want to do with it.