One of the most important things that determine the size of our deficit is how fast the economy grows. Currently we have a huge $1.4 trillion deficit, but if the economy grew at a rate of 2.8% that deficit would shrink to $861 billion. If the economy did better and grew at a 3.3 % rate the deficit would be reduced to $521 billion. If it grew at a rate of 3.9% our deficit would be reduced to $113 billion!
Currently the deficit is 62% of the GDP. If the economy grew at 2.8% it would be 76%,. If it grew at 3.3% it would be 66%, but if the economy grew at 3.9% it would only be 55%.
The reason for this is our tax revenue is dependant on the GDP. If the economy is growing more people have jobs and more people pay taxes therefore our revenue increases.
http://www.time.com/time/magazine/articl...Key to our understanding of economic growth, is what the government can do to increase that growth. Both Democrats and Republicans know that providing more jobs will help the economy.
Democrats think that by making intelligent investments in the economy it can prime the private sector pump and thus promote more jobs.
Republicans think that austerity measures are more important than stimulating the economy.
The Republican budget plan would loose 700,000 jobs and cause the economy to slow .5%.
http://www.bloomberg.com/news/2011-02-28...The effect of the slowdown in the economy would increase the deficit by another 10% of GDP.
Republicans deny that economic stimulus works, and that investments are just plain spending and should be eliminated. Well sometimes.
Recently Governor Jerry Brown proposed saving $1.2 billion a year by cutting spending on community redevelopment. That proposal was killed by the Republicans.
http://www.orangejuiceblog.com/2011/03/d...The Republicans don't really have an ideological problem with government investing to create jobs. They still support hundreds of billions of dollars in corporate welfare to the fossil fuel and nuclear industries. They voted against cutting off tax breaks to encourage companies to move jobs over seas. They just oppose spending any money on the poor or the middle class. They want all of the money to go to the major corporations not the small businesses that create most of the jobs.
http://dpc.senate.gov/docs/fs-111-2-118....Republicans think that by showering the rich and the corporations with money, that they will use some of that money to create jobs. The problem is that we have been throwing money at the rich with tax cuts for ten years and they aren't creating jobs. They are putting the money in off shore tax shelters or spending the money overseas. Corporations are sitting on trillions of dollars of profits but the only plants they are opening and jobs they are creating are overseas.
It would be very easy to counter the Republican argument for throwing money at the rich. Simply target the tax cuts, so the rich and the corporations would only get the money if they actually created jobs. Then you can take half of all that money we are wasting to stimulate the economy, and the rest to pay off the deficit.
If we are concerned with the deficit, simply allow the Bush Tax Cuts to expire in 2012 as planned. That will cut the deficit in half.
If we want to balance the budget we need to end all of our wars, shut down most of our 900 foreign bases, and cut the military budget in half.
If we want to balance the budget, tax Capital Gains the same as Income Taxes, create another tax bracket for millionaires, instate a .2% transaction tax that would force the Wall Street Speculators to put some "Skin in The Game". None of these measures would discourage hard work, and the transaction tax would actually discourage harmful behavior.
The Republicans are wrong when they say we don't have a revenue problem. Their economic disaster reduced revenue by about half. We need to replace that revenue somehow, and the obscenely rich are the only ones that wouldn't be hurt.
The Growth in Medicare is our largest expense but 85% of Medicare costs are spent in the last year of life. Shopping for cheaper insurance plans aren't going to change that expense. The only way to reduce end of life costs, is with preventative medicine, which the Affordable Care Law is trying to do.
A new Wall Street Journal/NBC News poll shows that the American People want our politicians to do just about the opposite of what the Republicans are proposing. 81% want a surtax on millionaires and 2/3rds want Medicare and Social Security left as they are (well maybe tweaked a bit so they are sustainable).
http://online.wsj.com/article/SB10001424...