Debt Negotiations: The $4 Trillion Question

July 15, 2011 — -- If you're like me and almost everyone else, these numbers are numbing. I don't have a CLUE what $4 trillion is – it's just too big.

As a point of personal privilege, I wanted to offer a bit of perspective on the relative size of the $4 trillion GRAND DEAL that is apparently too much for our government to swallow over the course of the next decade.

What would the Grand Deal mean – in percentage terms – compared to what Uncle Sam is expected to spend during the next decade?

The $4 trillion that was the focus of early debt deal negotiations represents about 8.7 percent of the federal government's total projected spending between 2012 and 2021. The Office of Management and Budget says Uncle Sam will spend $46 trillion in the next decade.

What would an 8.7 percent cut look like NEXT YEAR based on the White House's current spending projections?

It would lop off $324 billion from the budget. Sounds like a lot, until you realize that this level of reduction would take federal government spending to just 1.5 percent less than the level we saw in 2010. Total spending in this hypothetical scenario -- $3.4 trillion.

That's right – taking the big leap proposed in the "grand deal" (and assuming the pain would be equally distributed to all 10 years) would push spending to a level we were willing to accept a year ago.

Is that really too much for our politicians to swallow? Are Americans unwilling or unable to head back to the spending levels of 2010?

It gets even less daunting assuming you could find some way to share the budget fix equally with both spending AND revenue changes. The decrease in spending would represent a 4.4 percent reduction for the next 10 years. A $2 trillion increase in revenues would represent a 5.2 percent increase in the $38.7 trillion in expected revenues for the 2012 to 2021 period.