Bruce Bartlett Washington-based author :
It’s important to differentiate
It’s important to differentiate between the cyclical deficit, that which is caused by the economic slowdown, and the structural deficit, that which would still exist even if we were at full employment. The first is not a problem, the second is a very serious problem.
The structural deficit is caused by entitlement programs like Social Security and Medicare. The unfunded liability of these two programs—over and above payroll tax revenues—is about 8% of GDP in perpetuity. With the federal income tax equaling about 10% of GDP, every taxpayer would see a tax increase of 80% if we were to eliminate our long-term deficit entirely through higher revenues.
Of course, this isn’t going to happen, but neither is it realistic to think that spending will ever be cut enough to prevent deficits of such enormous magnitude that significantly higher taxes can be avoided. Even if a financial crisis can be avoided, action on the debt will be necessary to keep interest on the debt from crowding out every essential function of government.