Washington (CNN) – New Congress, meet the National Debt. Many in the 112th Congress resolve to tackle America's $14 trillion mountain of IOUs. But do they understand and are they ready for what that means?
In this week's American Sauce, we lay out exactly what decisions lawmakers face if they are serious about cutting down the debt.
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If anyone in Congress is genuine about a New Year's resolution to deal with the National Debt, here just a few of the real, tough decisions they face.
1. CUT SPENDING: The problem is massive. In 2010, nearly a third of federal spending was borrowed. The Federal government spent about $3.5 trillion total. Of that, $1.3 trillion was deficit spending or borrowed money. (Source: CBO)
- How much do you cut?
* The Simpson-Bowles debt commission recommended cuts of $800 billion by the year 2020.
* House Republicans propose cutting back to 2008 funding levels, a 20 percent cut in non-security spending.
* Some, like the Center on Budget and Policy Priorities say those kinds of cuts go too far, are unrealistic and would cost the economy too much.
- When do you cut?
* Many economists argue that large government cuts now would snuff out any economic recovery underway.
* Others say the debt problem must be tackled immediately.
- How do you cut?
* Go agency by agency, slashing ineffective programs or impose across-the-board cuts?
* Many praise the idea of finding programs that don't work, but subjective cuts would be time-consuming and could be politically radioactive.
- How do you deal with the federal workforce?
* 2 million Americans work for the federal government now.
* Simpson-Bowles proposed cutting the federal workforce 10 percent, through attrition.
* President Obama has already frozen non-combat federal salaries.
2. RAISE TAXES: Tax revenues in 2010 represented just 15 percent of GDP (spending was 24 percent). That tax figure is the lowest, relative to GDP in 60 years. It is expected to increase, but not by enough to put a dent in the debt. Some experts say the question isn't if you raise taxes but which ones to raise. (Source: CBO)
- Do you overhaul the entire tax system?
* Two commissions (Simpson-Bowles and Rivlin-Domenici) and a slate of economists urge Congress to overhaul the tax code, saying it is full of loopholes, shelters and confusion that cost money for taxpayers and government.
* Many recommend lowering all tax rates and ending most tax shelters and deductions, including mortgage deductions.
* A debate over the entire tax code could be difficult for a Congress that barely was able to agree on a two-year extension of the Bush Tax Cuts.
- What taxes and fees should go up?
* National sales tax? The Rivlin-Domenici commission proposes a 6.5 percent national sales tax.
* Soda tax? Rivlin, Domenici and commission also want a tax on sugary beverages at 1 cent per ounce.
* Gas tax? The Simpson-Bowles commission pushed for a 15 cents-a-gallon increase in gasoline taxes.
* Airline fees? Rivlin-Domenici eyeballed an increase in the Aviation Security Fee to $5 per trip.
3. TACKLE MEDICARE AND SOCIAL SECURITY: Currently the Medicare Trust Fund is projected to run out of funds in 2029 and the Social Security Trust Fund in 2037. Keeping those funds solvent is one issue. Another is keeping Medicare in particular from eating a larger and larger chunk out of the federal budget.
- Raise the retirement age?
* Currently Social Security is set to raise the full retirement age to 67 for people born after 1959.
* Some propose likewise increasing it to 68 in a few decades and then to 69, affecting (in order) those who are in their 20s and in preschool today.
- Cut benefits? Raise deductibles?
* Without action, Social Security would need to cut benefits an estimated 22 percent to survive once its trust fund is depleted.
* Some propose saving money on Medicare by cutting benefits. There are a wide-range of options but fiery opposition from powerful seniors groups and others.
* Others suggest raising deductibles and co-pays for Medicare, an idea on the table but with similarly passionate opposition.
- Means test? Charge more for the wealthy?
* Several proposals would increase fees and taxes that go to Medicare and Social Security from the wealthy.
* This also has many variations but all would raise a similar debate to the fight over the Bush Tax Cuts.