Unbalance this!

Now that the Cricket World Cup is behind us and मेरा भारत has won, the humdrum of daily economic news that had taken the back seat in the past few weeks has now started to come back to the forefront.

Not much has changed, we're still fighting over how much to spend this year (even though half the year is gone). The sad part is that the amount both sides are squabling over is not nearly what needs to be cut.

So we will have a shut down. Going by the last shutdown, non-essential workers will be fuloughed only to be provided back pay after budget issues are resolved. This game of political chicken is not to save the heart of America, no, this stalemate hurts us even more. How long will the world keep funding our debt if instead of doing business and running a nation, we are reduced to a bunch of squablers, the only goal of whom is to throw the other party out of office.

Yes, but can we really do something about it? One can surely dream about it?

Take a look at the largest spending items below

We can't really touch the Net Interest on our debt, so that's gone regardless. Let's leave Social Security out of the equation as, even though we owe a staggering 700Billion, payroll tax as seen in the revenue figure, brings in a little north of 800Billion making up for that annual liability for now (one fight at a time!)

The budget that can be touched purely from a theoretical standpoint is roughly 2.1Trillion dollars. The problem is, almost all of this spending is mandated in existing laws.

No political party worth their salt will ever try and tackle these. Sure Rep. Ryan (Wisconsin (R)) has suggested that Medicare be made a premium program, curtailing it from becoming the 78Trillion dollar monster in the future, but he also wants to cut taxes, across the board for Individuals. What a guy!

How about cutting taxes down to 20%, not 25% as he suggested, but, also removing every single tax exemption (e.g. Mortgage interest deduction, Child credit, etc.), eliminating all credits.

By some estimates, this will bring in a trillion dollars more in revenue. Currently, Individual income tax revenue is just short of a trillion dollars, even if reducing the tax bracket to 20% reduces that in half, you're still better off by about 500Billion dollars.

Let's mandate that defense be just that. Stop funding all wars. Recall the troops, defend America - that's all that matters. Reduce that budget by 30%, yielding about 200Billion dollars.

Cut Medicare/Medicaid benefits by 30%. Is it painful? Yes. You are the government, force industry to accept 15% less for their services to you. The remaining 15% will have to be absorbed by us, painful as it may be, it will be better than the program going insolvent in the future. This 30% cut will save 250Billion dollars.

Income security needs to be cut 15% along with Federal Pensions liability taking a 30% haircut.
This will save another 100Billion dollars.

All this adds up to just over a Trillion dollars of savings. This will leave us with a deficit of about 250Billion dollars. If we attain these fabulous cuts, we can address the rest by letting the USD weaken a bit more to lessen the impact of the debt burden - plus revenues realized by US companies overseas will marginally increase revenue coming in.

Of course, this is just idealogical talk.

Meanwhile, please make sure you don't go to any National Park on the weekend of 4/8/2011.