According to Keynesian economic theory, beloved by big government spenders everywhere, it is not only harmful but impossible for the federal deficit to be cut. There is an equation known as Modern Monetary Theory which states as follows: private surplus + government surplus - trade surplus = zero; or restated: private surplus - government deficit + trade deficit = zero. (See: http://www.nakedcapitalism.com/2010/06/martin-wolf-austerity-is-risky-business.html)
Currently, there is a trade deficit of about 5% of GDP. And currently the private sector for the first time in a long time is trying to save money and pay back debts, and this savings equals another 5% of GDP. Therefore the federal government must fill the gap by running a 10% of GDP deficit.
The solution to this is to increase exports. But it seems impossible for several reasons for the US to export items in large quantities to China or Japan. Therefore, as long as the private sector insists on saving money, there must be huge deficits to fill the gap. And these huge deficits will continue to accumulate until one day, no one knows exactly when, the whole system will pop.
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