The debt of the United States is rising to unprecedented – and unsustainable – levels. According to the Peterson-Pew Commission on Budget Reform, under reasonable assumptions, the public debt of the U.S. is projected to grow to 85% of GDP by 2018, 100% by 2022, and 200% in 2038. No country can support debt at these levels without huge costs to its standard of living at a minimum and most likely a severe crisis.

Drastic action now would threaten the already fragile economic recovery. But failing to convince markets and creditors that the U.S. is serious about reducing its debt in the longer term would cause interest rates to rise dramatically and likely trigger a fiscal crisis.

We need to establish a fiscal goal and commit as a nation to achieving it. The Peterson-Pew Commission recommends a goal of stabilizing the debt at 60% of GDP by 2018 in the report, Red Ink Rising. We must set an ambitious, yet attainable, goal that Americans can support. See more about the reasoning behind this goal on the FAQ page.

This simulation was designed to illustrate the tough budget choices that will have to be made and to promote a public dialogue on how we can set a sustainable fiscal course. How do your choices stack up? Good luck.

Yes, this calculator assumes that raising taxes increases tax revenue and lower taxes lowers tax revenue, at least within the time horizons under consideration. The contrary assumption - essentially, that we're currently on the wrong side of the Laffer curve - is not widely held among economists.

*sigh* Look, I don't want to get into another big debate about the fundamental assumptions of economic theory. If you think cutting taxes will increase revenue, then this calculator isn't going to be of much interest to you.

I think cutting taxes will increase GDP, which makes the debt a smaller portion of GDP, which is allegedly the purpose of the calculator. In other words, the programmer was short-sighted because they were only looking at revenue.

RangerDave:

Of eligible tax payers in the United States, how many actually pay taxes? I ask, because invoking the Laffer Curve generally entails some assumptions about how the curve actually looks in the United States. More to the point, unless we're talking about 3 or 4 dimensional extensions, we're not likely to produce a useful curve relative to personal, corporate, or aggregate income taxation in the United States. Consequently, I'd like to know what assumptions are being made and exactly where you're getting the notion we're not "on the far side of the Laffer Curve."

I kept the tax cuts and dropped it to 48%

I win yes?

No, no. We all lose.

You're beyond my knowledge base here, Khross. I invoked the "wrong side of the Laffer Curve" as a shorthand for the idea that lowering federal tax rates from their current levels will lead to growth effects sufficient to produce higher federal tax revenues over the near term (e.g. the 8 years contemplated by the calculator).

So, do you think that if the Federal government lowered it's individual income and payroll tax rates, but changed nothing else, total federal revenues from all sources would increase?

Those of you who aren't Elmo:

How many tax increases did you go for? This calculator seems set up to propogate the idea that higher taxes are a good idea, despite historical evidence to the contrary.

So, do you think that if the Federal government lowered it's individual income and payroll tax rates, but changed nothing else, total federal revenues from all sources would increase?