Multiply those numbers by a million and you have the current situation of the US government.
Non-discretionary spending is spiraling out of control. I had this discussion at dinner last week where someone suggested it was crazy not to raise taxes. I disagreed. My argument is basically this:
1. People on low incomes currently pay little, no or even negative tax (factoring in government benefits);
2. Such a system creates a disincentive to work with the marginal rate of tax. If you earn $10,000 and get $2,000 from the government but by $20,000 you are paying $2,000 in tax with no benefits, the marginal rate of tax is actually 40%;
3. The problem isn't the top rates of tax, it's all the exemptions and the complexity of the tax system.
So how about instead of populist pleas of taxing the rich we simply make everyone pay their fair share? What about 25 cents in every dollar for every dollar you earn each year above $20,000 (and nothing below)?
Congress seems beholden to special interests and pork barrel politics. In the 90s Congress tried to surrender their power to the executive branch by passing the line item veto measure. In previous years they were unable to close military bases and had to establish the Base Realignment and Closure Commission.
Will it take a similar commission for Congress to distance themselves from similarly hard decisions? The longer this goes on, the harder it's going to get.
What I see happening in the coming years:
1. Retirement age being raised to 70 or even higher;
2. Federal sales tax similar to the consumption tax every other OECD nation has. State sales taxes are too complex. Interstate sales tax exemptions are fighting a losing battle to continue to exist; and
3. The US adopting a more isolationist foreign policy, including a continued decline in the US military that is already well underway (compare the size of the US armed forces today to what they were 20-25 years ago).