A Balanced Federal Budget? Not without Pain

Businesses and individuals who benefit from tax breaks must surrender some self-interest.

If you think it should be easy to balance the federal budget gradually, think again. This year’s shortfall between spending and revenues is heading toward a record $1.6 trillion -- that’s 1,600 billions of dollars. That amounts to 42% of nearly $3.8 trillion in federal outlays, so Washington must borrow 42 cents of each dollar it’s spending. As a percentage of America’s gross domestic product -- the value of what our nation produces each year -- the deficit is at a post–World War II record high of 11% (nearly double the previous modern record of 6% in 1983, coming out of America’s last severe recession).

Forcing the budget into balance too quickly would be risky to the fragile economic recovery. But how about trimming next year’s deficit by, say, 15%? Seems like a reasonable first step in a multiyear belt-tightening crusade. Without significantly higher revenues, that translates to $240 billion of spending cuts this year.

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Knight Kiplinger
Editor Emeritus, Kiplinger

Knight came to Kiplinger in 1983, after 13 years in daily newspaper journalism, the last six as Washington bureau chief of the Ottaway Newspapers division of Dow Jones. A frequent speaker before business audiences, he has appeared on NPR, CNN, Fox and CNBC, among other networks. Knight contributes to the weekly Kiplinger Letter.