An individual or business with spectacularly negative net worth will be forced to cut spending to match income – once the credit cards run out. The same is true of the US government, but its credit card has a very large limit. Investors around the world appear to be content to loan huge amounts at very low interest rates to fund spending that is currently 56 percent higher than revenue. It seems reasonable to assume that this cannot continue forever, and spending will eventually have to adjust to reality.
In this area, Ron Paul is far bolder and more specific than any of his opponents. He proposes large cuts to defense and discretionary spending. But other spending such as Medicare, Social Security, and interest would continue to grow. Paul estimates total federal spending under his plan would be just over $3 trillion in 2016 compared to the $3.6 trillion that was spent in 2011. The Congressional Budget Office projects federal spending of $4.5 trillion in 2016 under Obama’s budget. Whether Paul’s cuts would be enough to avoid deficits and begin to pay down debt, of course, depends on what is collected in taxes.
