Of course, this is a question that cannot be answered in an objective way. People of different political points of view will have different opinions as to what cuts should be made. Liberals might prefer, for example, to cut subsidies to big companies as well as military spending. By contrast, conservatives would prefer to cut spending for social programs and for things like environmental protection. I would argue that the most important areas to cut are the areas of Medicare, Medicaid, and Social Security. These are known as “entitlements.”
The main reason why I would say that cuts need to come in these areas is simply because these are the biggest parts of the federal budget each year. Discretionary spending on domestic programs only makes up about 17% of the budget each year. Spending on the military makes up about 19%. In Fiscal Year 2012, these two areas accounted for about $1.28 trillion. The deficit as a whole was about $1.1 trillion. This means that we would have to cut essentially all government discretionary spending to balance the budget.
Therefore, we need to do something else. Spending on the areas that I have identified make up about 45% of the budget. This is set to grow as our population gets older. Therefore, this is where we need to make cuts. We need to, in particular, find ways to reduce spending on health care, which is growing much faster than inflation.
Of course, cuts to discretionary spending should be made as well. However, these cuts cannot be very substantial when compared to cuts that could come from entitlement spending. Again, however, this is only my opinion. There is no objectively right answer to this question.