“A billion here, a billon there and pretty soon you’re talking about real money.” That quip may have suited the moment in the 1960s but is utterly quaint today. In June 2024, the Congressional Budget Office projected $6.8 trillion in federal spending in 2024. That’s $1 billion every 75 minutes.

On the other side of the ledger, the CBO projects tax revenue of $4.9 trillion or $1 billion every 90 minutes.

Are deficits the result of too many tax cuts? Too much spending? Or both?

According to the CBO, tax revenue has been remarkably stable no matter how the tax code is structured. From 1974 to 2023, revenue averaged 17.3% of GDP. Revenue in 2024 is estimated to be 17.2% of GDP rising to 18% by 2034.

Outlays are a different story. The 1974 to 2023 average was 21% of GDP resulting in an average annual deficit of 3.7%. In 2024, spending is projected at 23.1% rising to 24.9% by 2034.

Translating this to dollar terms, hold onto your hats. CBO projects a $1.9 trillion deficit in 2024 and a 10-year deficit of $22.1 trillion. Ten-year spending of $84.9 trillion dwarfs $62.8 trillion in tax revenue.

One way to close the deficit would be to take a page from the Clinton era. Declaring that “The era of big government is over,” President Bill Clinton and the Republican-led Congress turned a $203 billion deficit in 1994 into a $125 billion surplus in 1999 by limiting spending growth to 14% over five years and letting the natural increase in revenue work its magic.

Politicians proposing deficit elimination today seem as extinct as dodos. Donald Trump wants to cut the corporate tax rate and eliminate income taxes on Social Security and tips. This is supposedly going to be offset with tariffs that will not be paid by American consumers. If you believe that, I have a wall that Mexico is going to pay for.

Meanwhile, Kamala Harris apparently endorses the Biden plan to raise $5 trillion in taxes but spend $4 trillion on everything from housing subsidies to tax credits.

Even without spending beyond the CBO baseline, $5 trillion over 10 years is almost a rounding error in the context of $85 trillion in spending and $22 trillion in deficits. Throw in $2.6 trillion of additional taxes from Sen. Elizabeth Warren’s wealth tax and you’re still nowhere close.

What would it take to move tax revenue from 18% of GDP to 25%? In the words of bank robber Willie Sutton, you have to go where the money is.

Per ChatGPT, Americans making less than $400,000 per year earn 70% to 75% of all income. The Manhattan Institute scored ways of including this cohort in revenue-raising as follows: raise payroll taxes by 10% (would raise 3.6% of GDP), raise all income tax rates by 10% (would raise 3.4% of GDP) or impose a 20% value added tax (would raise 2.8% of GDP).

The last presidential candidate I recall who promised a general tax increase to reduce the deficit was Walter Mondale. He lost 49 of the 50 states in 1984.

Jeffrey Scharf welcomes your comments. Contact him at jeffreyrscharf@gmail.com.