Why do I feel like we are splitting hairs here? This article talks about a 1.5% cut in government spending (or increases of up to 3.8%). Really? That's what I call a rounding error. It's bullshit cuts (or increases) in spending that will do absolutely nothing real to solve our problems.

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TL;DR: We need to cut in the order of 50% from the Federal Budget in order to hope to be debt-free in FIFTY YEARS.

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I decided to go out and finally get a sense of where we stand. We have huge annual deficits and owe a lot of money. Let's fix it.

Two goals:

1- Get back to a balanced annual budget.

2- Erase our national debt in 50 years.

To simplify we are not going to add interest to our debt.

Sensible? I would prefer to get back to zero debt in ten years, but let's go for 50 instead. In other words, our kids are going to be paying off the national debt for most of their adult lives.

How to do it? Tax increases? Spending cuts? Both?

Let's say both.

Now, I am going against my grain here because I don't believe in paying more taxes. In fact, I want to see our tax burden reduced to flat 15% for everyone, corporations included. But, that's a different subject.

For the purpose of this exercise I'll go with the "tax more" crowd. No problem.

OK, how much?

Well, let's say that we really go to the dark side and choose to pay 75% of our national debt and deficit via tax increases and the rest by reducing expenditures (various programs, entitlements, military, whatever). That should make those who believe in higher taxes very happy. Fully two thirds of the money we need will come from higher taxes.

To go with a popular theme, let's tax the rich and leave everyone else alone. I propose that this mathematical exercise only only increase taxes on those earning $200,000 or more per year. Again, this is going against every fiber of my body, but I want to "go with the flow" in the interest of just seeing what these numbers look like.

OK, the very first fact that comes out of this discussion is that our government needs to cut spending by 25%. Simple numbers. Not 1.5%, not 3%. 25%. I don't care where it comes from, this is just math. Someone needs to figure out how to cut an honest 25% in spending. The rest will come from increased taxes.

But, wait, our government is also responsible for paying for 25% of the accumulated national debt by cutting costs. So they have to cut further than just the equivalent of 25% of the annual deficit.

OK, I know a little math and know how to use Excel, let's play with some numbers.

How much do we owe?

http://www.usdebtclock.org/

Here are the numbers I'll use for this exercise:

US national debt: $16,000,000,000,000
US annual federal deficit: $1,500,000,000,000
US Federal spending: $4,000,000,000,000

I rounded some of it and extrapolated to the end of the year just to get to play with easy numbers.

As we agreed, we are going to be debt-free in 50 years. What's the total annual amount of money we need to raise, if you will, in order to do accomplish this?

Annual obligation, every year for 50 years: $1,800,000,000,000

How much of this does the Federal Government have to pay?

Federal government contribution via spending reductions (25%): $450,000,000,000

Percentage reduction with respect to total annual Federal spending: 11%

So, the government has to find half a billion dollar in spending cuts for 50 years. We do the rest by increasing taxes on the "rich".

Here we go:

How many people make $200K or more?

http://en.wikipedia.org/wiki/Household_income_in_the_United_...

http://www.lazymanandmoney.com/how-many-people-make-more-tha...

I'll use data from the second link because it is a little more granular. Here are the numbers I'll use. Number of people making more than n, where n is the left column:

200,000	3,924,490
500,000	729,451
1,000,000	236,883
1,500,000	128,787
2,000,000	84,514
5,000,000	22,596
10,000,000	8,274

What does this mean? If we decide to tax people who make $200K or more, there are about four million of them. If, instead, we decide to tax those who make one million or more, there are 236,883 of them.

We agreed that we are going to cover 75% of the money we need to raise through taxation. Let's see how much each individual would have to pay if we apply this to each group.

Total funds required: $1,800,000,000,000 * 0.75 = $1,350,000,000,000

Per capita cost depending on chosen earning threshold:

200,000	$343,994
500,000	$1,850,707
1,000,000	$5,699,016
1,500,000	$10,482,424
2,000,000	$15,973,685
5,000,000	$59,745,088
10,000,000	$163,161,711

This means that if we choose to tax those earning $200K or more, they'll have to pay $343,994 per year, for the next FIFTY YEARS, in order to become debt-free.

If, instead, we set the threshold at one million dollars or more in income, they'll have to pay $5,699,016 per year for the next 50 years.

Clearly this is impossible.

OK, let's go with a progressive system. Each group will share the burden in a progressively increasing proportion. Those who earn more will pay a higher percentage of the money we need to raise.

How many people in each sub-group?

$200,000 - $500,000 3,195,039
$500,000 - $1,000,000 492,568
$1,000,000 - $1,500,000 108,096
$1,500,000 - $2,000,000 44,273
$2,000,000 - $5,000,000 61,918
$5,000,000 - $10,000,000 14,322
$10,000,000 or more 8,274

Unlike the prior count, this table simply shows how many people are found within the given brackets.

Let's have them carry the burden in the following proportions:

$200,000 - $500,000 1%
$500,000 - $1,000,000 2%
$1,000,000 - $1,500,000 4%
$1,500,000 - $2,000,000 8%
$2,000,000 - $5,000,000 10%
$5,000,000 - $10,000,000 25%
$10,000,000 or more 50%

Total 100%

How much would individuals in each group have to pay then?

bracket share of burden corresponding amount per taxpayer,per year percent of total income
$200,000 - $500,000 1% $ 13,500,000,000 $ 4,225.30 2% 1%
$500,000 - $1,000,000 2% $ 27,000,000,000 $ 54,814.77 11% 5%
$1,000,000 - $1,500,000 4% $ 54,000,000,000 $ 499,555.95 50% 33%
$1,500,000 - $2,000,000 8% $ 108,000,000,000 $ 2,439,410.02 163% 122%
$2,000,000 - $5,000,000 10% $ 135,000,000,000 $ 2,180,302.98 109% 44%
$5,000,000 - $10,000,000 25% $ 337,500,000,000 $ 23,565,144.53 471% 236%
$10,000,000 or more 50% $ 675,000,000,000 $ 81,580,855.69 816% 816%

Total: 100%

Well, it looks alright to begin with, doesn't it? Make $200K or more, you get to pay about $4,000 per year for the next fifty years. $500K or more? about $50K per year for the next 50 years. Tough, but, hey, got to pay your "fair share" right?

The problem becomes very evident as you get past these initial brackets. You'd have to take half a million dollars a year from people earning in the one million bracket. That's not sustainable. Certainly not for 50 years.

One more thing: These are tax INCREASES. In other words, the guy making a million bucks will have to pony-up $500K more than what he (or she) already pays in taxes. That means that the vast majority of the money they earn would have to be handed over to the Federal Government for the next fifty years. Raise your hand if you think that's sustainable.

Now, as you get past the million dollar bracket the situation becomes even worst. The highest earning groups would have to pay MORE than what their income to Uncle Sam for the next fifty years straight. If you happen to earn ten million a year you'll have to hand over over eighty million every year for the next fifty. Right.

...continued on next post due to HN length limitations here: http://news.ycombinator.com/item?id=4333013