Budget

In order to have a balanced budget, one has to ensure that dollars in is greater than or equal to dollars out.  Seems simple enough and yet the US government finds itself $14,300,000,000,000 in debt at the time of writing.  (Source: http://www.usdebtclock.org/).  That is an awful lot of money to owe.  In fact, that is around $46,000 for every man, woman, and child in the United States!

So how did we get here?  Article 1, Section 8 of the Constitution has everything to do with it:

The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States; but all Duties, Imposts and Excises shall be uniform throughout the United States;
To borrow money on the credit of the United States;
To regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes;
 .....
To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures;
.......
To raise and support Armies, but no Appropriation of Money to that Use shall be for a longer Term than two Years;

Most of the subsections deal with the reality that in order to operate, the government needs to spend money on certain things, and in order to have that money they would need the power to tax their citizens.  Given the fact that we just fought a war essentially against taxation without representation, it is safe to assume that the founders wanted to ensure that no similar situations would arise here, while still allowing for a government to accomplish the duties of running the country and protecting our freedoms.  But then there is the one I highlighted, regarding borrowing money.  Sure, at the time the US was a fledgling nation and needed to rely heavily on borrowed money, but look at where we are now.  To make matters worse, we face what's known as the debt ceiling, or the most amount that the government can legally borrow, this August.

Depending on which side of the aisle you fall, you probably have one of the following opinions:

Our current debt and deficit is a result of our government not taking in enough revenue and taxes should be raised, ideally on the rich since the middle class needs to be protected; or
Our current debt and deficit is a result of our government spending too much money and raising already high tax levels on anyone during an economic recovery period would be a disaster.

So which side is right?

Pictured: spending less vs. taxing more

 Common sense would dictate that either way, spending over $4 billion a day totaling to a $1.5 trillion annual deficit might not be the best tactic, especially as we near the debt ceiling.  Unless the average American is comfortable with a larger individual obligation, raising the debt ceiling is not an option.  So lets take a closer look at each argument.

Raising Revenue (taxes):
Many on the left blame the budget shortfall on the tax cuts enacted by President Bush and continued last December by President Obama.  What many people fail to realize is that the tax cuts were enacted for all Americans, and discussion of continuing them for people making less than $200 thousand annually while allowing them to expire for those who make more is ridiculously inequitable and gets back to the duties being uniform issue.  Either way, lets take a look at the breakdown of the US government's revenue sources.  Income tax is already 45%, broken down by a questionable bracket system of income, where people who make more money not only pay more in taxes but pay a higher percentage of their income.  How is it fair to charge some Americans over $100,000 a year in taxes and give refund money back to others?  Both receive the same access to public services and enjoy the protection of living in this country, and both have the responsibility to follow the law.  Pointing to the tangible indicators of success for one as justification for confiscation does not fly with me.  If anything, everyone should be paying the same percentage of income or replace our complicated and inequitable income tax system with a consumption tax like FairTax.

Reducing Spending:
Republicans like to promote cutting welfare programs and redundant government agencies while Democrats like to promote cutting military spending, and yet both sides get angry when you suggest cutting government spending in all areas across the board by some percentage that would not only balance the budget, but also allow the repayment of debt.  Let's take a look at the breakdown of spending by category.  As you can see, Social Security, the Department of Defense, Welfare, and Medicare/Medicaid comprised approximately 75% of our 2010 budget.  Where ever your politics lie, if you think we couldn't trim 30% of waste and inefficiency out of the big 5 in order to remain solvent, then you might be part of the problem.

The Keynesians in the crowd will dislike this, but I support the recent public outcry for a Balanced Budget Amendment.  This proposed legislation would stipulate that our government would be bound to not spend any more than anticipated tax revenues in any given budget cycle.  That way, no matter how the left and right squabble over high taxes versus smaller government, their compromises would never again be able to put the American taxpayers on the hook for trillions of dollars worth of debt.  What do you think?