The US fiscal gap now stands at an estimated $205 trillion, or 10.3 percent of all future US GDP. Closing this gap is imperative, and requires a fiscal adjustment of an immediate and permanent 37 percent reduction in spending (apart from servicing official debt), an immediate and permanent 57 percent increase in all federal taxes, or some combination of the two. The necessary size of this adjustment increases the longer it is put off.
Both can be true, hypothetically. Government programs have been mal investment.
This is why we need spending cuts and not tax increases.
I’m not confident that Republicans have the stones to do the necessary cuts. The Democrats don’t think we’re spending enough. We will live through the financial cliff someday.
Fortunately, raising taxes by 57% will have no economic impact whatsoever.
(For those wondering, yes- that’s sarcasm)
Why Eliminating the Deficit is Technically Easy but Still Politically Impossible
I do not worry because it is technically very easy to run a big surplus, as I describe in the above link, though it is not yet politically possible it will be once bond buyers start to consider US treasuries risky enough to demand a high interest rate.