Social security is 4.5% of GDP, if I’m not mistaken.

The national debt was on a downward trend until 1980. Then Reagan cut taxes and hiked spending, and all hell broke loose.

OK, I’ll give you that. I am inclined to believe the numbers from the CIA World Factbook before I believe China’s official numbers.

“Total US defense spending is a little less than health care.”

Are you talking about the federal governments share of health care, or the entire sector?

DoD spending is about 4% of GDP. Add another 1% for Iraq and Afghanistan and you’re at 5%.

The health care sector of the US economy is about 16% (and rising,) which is more than three times current defense spending.

According to Peter Orszag’s 2007 testimony to Congress, Medicare and Medicaid are currently were at 4.5% of GDP, and projected to rise to 20% by 2050.

According to a more recent document from the U.S. Senate, Medicare and Medicaid were at 5% of GDP at the end of 2009, and projected to rise to 12.7% by 2050.

Reeling all of this back in:
* Federal revenues are more or less flat since 1965 (actually slightly up now)
* Defense spending is stable on a downward trend since 1965
* Total discretionary spending (which includes transportation projects) is on a downward trend since 1965
* Medicare and Medicaid are on a strong upward trend
* The U.S. Federal Debt is on an upward trend

Measured by GDP%, with revenues relatively stable, and the debt rising, I look for large expenditures that are also rising. What I see is Medicare and Medicaid. That’s the problem in the Federal Government’s structural deficits, and it is getting worse.

The all time highest U.S. Federal debt, as measured by GDP%, was about 125% after WWII. There were no structural deficits, so it was manageable. The 1965 Social Security Debt gave us our structural deficits. If that is fixed, the U.S. will be able to eliminate deficits, and reduce the debt. Once that happens, a lot of money will become available for plenty of infrastructure projects.

Total US defense spending is a little less than health care. But developed countries can cope fine with one third the per capita amount of defense spending as the US; they can’t cope with lower health spending.

Most of the DoD’s budget goes to personnel. They’ve been working to reduce manpower requirements for years, but it takes time as equipment tends to have a fixed need for manpower. Next generation equipment is needed to employ equipment that is less labor intensive.

Now, if you want to reduce defense spending without necessarily shrinking the size of the military, address the DoD’s inability to control equipment acquisition costs. Check out this post on Information Dissemination, a pro-military blog that focuses on maritime security. My guess is that the U.S. DoD probably spends tens of billions of dollars each years on runaway costs. Unfortunately, this is not something that can be fixed in a few months. Also, all equipment acquisition programs can’t simply be shut down until it is fixed without decimating the industrial base.

Back to what is driving the National Debt, it is Medicare and Medicaid. They have been exploding, and it is these programs with costs that are on an upward trend. This is exactly why we have a structural deficit.

Yonah, please clarify your perspective, as well as the time frame in which you are advocating for tax increases.

On the one hand you repeatedly cite the need for job creation, as well as how spending cuts will be detrimental to this. You also seem to be advocating tax increases now, even though this will hinder job creation. I’m interested how you view the importance of job creation, as well as where it fits in your world view, from a hierarchical perspective.

I admit that from the perspective of economists looking for maximum job growth, it would be damaging to argue for tax increases, even as you’re increasing spending. That said, I never suggested that I was working from the same perspective as claims the president. Rather, I was suggesting that there are arguments to be made for both tax increases and spending increases, and meanwhile Mr. Obama is pushing for neither.

unless you touch defense or SS/medicare/aid you wont fix the deficit. this is what got me about bush (made a big deal about cutting $3B and at the same time increased spending by $50B) and mccain whom made such an issue over the smallest pork projects while ignoring the biggest culprits. how about we shrink our military so that it is still the biggest in the world, just not twice every military in the world combined and then some. i have never seen more government waste than that of the military and yet they always get a free pass on any criticism (largely because they hide behind national security secrecy).

i always find it funny that those who bitch about the deficit are all angry old geezers who have their SS and medicare and got their low taxes over the last 30 years (while underfunding our once great K-12 education system). you dont hear any cries over the deficit from the younger generations who likely wont get their SS and medicare bcs it will be broke and will also have to pay higher taxes to make up for all the unfunded entitlements for todays geezers.

Yonah, I find a serious inconsistency in the above paragraph. Yes most economists think that reducing or freezing spending in the current environment (BTW, the “Great Recession” is over, but the recovery will take some time) is a very bad idea, most economists also think that new taxes in the same environment is also bad. Paul Krugman has frequently cited 1937 as an example.

New tax revenues will stunt new job creation, while new stimulus spending will facilitate new job creation. This is just robbing Peter to pay Paul. What I find particularly counterproductive about such an arrangement is that new private sector jobs are more likely to be permanent than those from stimulus funded economic activity.