Why the Budget Deficit Projections Are So Worrying

The budget deficit is bad and according to the latest budget projections only going to get worse. While revenue is expected to remain relatively flat, spending is going to skyrocket due to spending on entitlement programs. The graph below shows a very ugly picture.

By 2020, it's projected that interest on the debt alone will be $800 billion. There are also national security implications to our growing national debt. China already holds $800 billion in US debt and that's expected to increase by $1 trillion over the next ten years. China has already threatened to sell US debt in response to US sales of military equipment to Taiwan. This influence is only going to grow.

So, what can the government do? Cutting NASA and other discretionary programs is not the solution. By 2016 these programs will make up only 10% of the government's budget. Instead, painful cuts must be made to entitlement programs - social security, medicaid, medicare, etc. This will be difficult since each of these programs have a strong consumer and industry lobby.

It's time to suck it up though. Some combination of tax increases as well as entitlement cuts are coming unless we want to be held hostage by our growing debts.