"AFTER YOU ALPHONSE*

No, after you Gaston."* The president has recommended small but substantial cuts to the Federal Budget on an amount totaling only about $500 billion of the Federal Budget (Freeze the budgets of these agencies at 2011 levels. Freeze Federal Employee's salaries for two years.). Note that the $500 billion of agencies being considered for cuts (Commerce, Interior, DOD, DOE, EPA, HUD, Agriculture, etc.) is only about 40% of the Federal deficit so you could eliminate them completely and not come close to balancing the budget. The congressional opposition says he punted.

What they want is the president to propose substantial cuts in entitlements (Social Security-23% and Medicare-12%) which, along with payments on the Federal debt(11%), are a substantial part of the budget - 46% in 2003, for example.** This is the "After you Alphonse." But the president was the Republicans to propose the cuts first which is the "No, after you Gaston." Certainly, you cannot approach a balanced budget without substantial cutting of Social Security and Medicare and perhaps other entitlements (Medicaid-7%, means tested entitlements-6%, and mandatory payments such as pensions-6%).

So far Republicans have refused to approve any increased taxes, particularly on the wealthy, which must be another part of the equation toward a balanced budget.

So this is what I think may happen. The president will continue to offer small but substantial cuts to the Federal budget. Eventually there will be a horse trade with the president approving some cuts to Social Security and Medicare as well as core agencies and departments with Republicans agreeing to some increases in income tax on the wealthy and oil companies. It must be done together.

What kind of cuts? For details of the presidents proposals for 2012, see: http://www.huffingtonpost.com/2011/02/13/obama-budget-proposal-cut_n_822689.html (Scroll down to see cuts to Departments and Agencies. Note that some agencies are recommended for massive budget increases: Dept. Education - 38.5%!)

But to really get to a balanced budget, we need a rapidly growing economy with significantly increasing employment. After all, the Federal revenues as a share of the nation's economy are near a 60 year low: http://www.suntimes.com/business/3706985-420/taxes-too-high-theyre-actually-at-60-year-low.html.

Something that should be seriously considered is to let corporations repatriate foreign profits at a 5% tax rate. This might generate something like $50 billion that could be applied to the deficit, another small step but a significant one. And the repatriated funds might also add to the economy, even if they were distributed as special dividends by the corporations (but not purchase of existing stock). Although this has been mentioned, I don't know if anyone in congress or the president has actually proposed it.

* http://en.wikipedia.org/wiki/Alphonse_and_Gaston

**http://wiki.answers.com/Q/What_percentage_of_the_U.S._federal_budget_is_spent_on_entitlements