Renewed warnings about the US Federal Government's budget deficit hit the front page of the New York Times today.

The Federal Reserve chairman said Wednesday that the government must begin to make “difficult choices” to address its gaping deficits and warned that “postponing them will only make them more difficult.”

Bernanke continued:

"Although sizable deficits are unavoidable in the near term, maintaining the confidence of the public and financial markets requires that policy makers move decisively to set the federal budget on a trajectory toward sustainable fiscal balance."

The United States needs to spend less money. Period. But that is the easy part. The hard part comes when specific cuts must be made.

(I should add that this post is written under the assumption that no further tax increases are politically feasible/possible/desirable in the short- or medium-term)

The American reaction to potentially cutting Social Security benefits is representative of the difficulty of cutting domestic social benefits - Americans react with visceral disdain to any suggestion that their Social Security benefits might be cut and politicians are wary of running on benefit-cutting platforms. Social Security is rightly called the "third rail of American politics."

If social benefits can't feasibly be cut, where to next? Foreign aid is a favorite target of budget-cutters (71% of Americans would cut it), but it accounts for less than 1% of the total federal budget.

One idea, until recently thought to be tantamount to political suicide, is to make cuts in the US Defense Budget, which represents the largest single piece of the discretionary budget. Why is it not political suicide now? Matthew Yglesias has some interesting analysis that examines the political feasibility of defense cuts.


(Graph courtesy of Anne Lowrey of the Washington Independent - In blue, the number of people who say something should be cut with. In red, the percent of the budget that these programs account for)

Yglesias calls defense spending "the least-unpopular cut" of "the major budget items," but correctly identifies that "it’s very politically difficult for a president to do anything that provokes the ire of the defense establishment whether or not it polls well in the abstract."