It would, of course, be possible to reduce the deficit by eliminating medical care and pensions for the elderly and disabled, while continuing to let multi-millionaires exploit loopholes in the tax code to pay less taxes than many people working at minimum wage, but this is not only a bad solution but a cruel and inhumane one.
A major way to reduce the deficit is to look at tax breaks for corporations and the very rich as subsidies to the rich and concentrate on eliminating them. Also, by allowing US companies to offshore financial activities and reduce the taxes they pay, we are essentially subsidizing the export of American jobs; we should cease doing so.
Another major area in which we can reduce spending is defense. We currently spend more on defense than any other nation in the world, and by reducing our involvement in foreign wars, could reduce our expenditures dramatically.
Finally, we could reduce our current account deficit dramatically by massive investment in renewable energy.
The only way that we can reduce government spending enough to end up with anything close to a balanced budget is by adjusting the way that our entitlement programs work. Specifically, it would be a very good idea to reform Medicare and Medicaid.
These medical entitlements already eat up a great deal of our federal budget and that share is growing as medical costs rise. Therefore, we will need to rein in spending in this area. One way to do this would be to end the fee-for-service system of Medicare in which the government essentially promises to pay for every procedure a Medicare patient has. Instead, the government should give future Medicare recipients a defined amount of money they could use to go and buy private health insurance. This would be likely to drive down health care costs.
Without fundamental reform of our entitlements, we cannot reduce our federal spending to any relevant degree.