Currently the US is paying about 3.5% in interest on debt. This means that we are paying about $35 billion in annual interest for each $1 trillion in debt. Currently we are at about $14 trillion debt so the annual interest should be around $490 billion. And this $490 billion does not pay down the principle of the debt...this is only the interest on the debt.
BTW; I read something a few days ago that indicated at our current spending rate, that by 2020, the annual interest payment on debt will exceed $1 trillion!
Let's move into Fantasy Land for a moment and 'assume' we can remove $350 billion from society each year in additional taxation. Assuming 140 million wage earners, this comes to about $2500 per person in additional taxes each year. Even if we could extract this much money out of society each year, it will still take about 40 years to pay down the $14 trillion in debt.
This does not take into account the current deficit spending of $1+ trillion each year. Let's move into Fantasy Land again, and 'assume' we can reduce deficit spending by $500 billion, which means deficits will lower to $500+ billion. If we wish to raise taxation to cover the remaining $500 billion deficit, this comes to another $3500 per wage earner in additional taxes each year.
So doing some very simple math, to pay off the debt in 40 years, and to stop deficit spending, using the above scenarios, we need to come up with $490-$1000 billion per year in interest, $850 billion per year in additional taxation, or about $6000 per year in additional taxes from all 140 million wage earners...and in parallel...reduce government spending by $500 billion!
Obviously achieving this is improbable! My guess it's impossible! Not only is this impossible, but just think of the negative effects on the current economy of removing $850 billion (new taxes) + $500 billion (reduced government spending), or $1.35 trillion per year from consumers and the economy?
Finally, if the US cannot even begin to get a handle on deficit spending by balancing the budgets, there is no way possible we can begin to reduce debt...this is the awful reality when all numbers we talk about today have 9 or 12 zeros following them.
The only way to reduce deficits and eventually debt, without critical pain to the current economy, is to hope that 'something' will be the impetus to create several million middle-class paying jobs, and sustain these jobs for many years, thereby increasing GDP, thereby creating more tax revenue.
To grasp this complexity without knowing the 'impetus' for growth and job creation, pretty much tells me we can't begin to mitigate deficits and debt for maybe another decade...if we're lucky...
Your comments?