It’s Easy to Gripe About USA Inc.’s High Expense Levels... That Said, High Expenses Could be Covered by High Revenue e There are two primary drivers of USA Inc.’s revenue: 1) GDP growth and 2) related tax levies on consumers and businesses. e To bring its income statement mechanically to break-even for 2009 (excluding one- time charges), USA Inc. would have needed to raise individual income tax rates by ~2x across-the-board to an average of ~26-30% (from ~13%) of gross income.' This certainly seems draconian. And a tax increase of this nature would surely have a significant negative impact on USA’s GDP growth as consumers would have far less disposable income to buy goods and services. e This brings us to a key element of USA’s financial challenges — the need to drive economic (GDP) AND related job growth. This is not easy. A material portion of GDP growth over the past few decades was driven by rising consumption aided by rising leverage and we have now entered a period of de-leveraging. e Stronger economic growth would be hugely beneficial for USA Inc.’s revenues. But the legacy of the financial crisis - severe housing imbalances and the need to complete the long process of writing off private mortgage debt — means that the US recovery will probably remain slow for at least several years. The silver lining: A booming global economy should provide a modest lift to US growth. Note: 1) USA Inc.’s F2009 revenue shortfall was $997B (excluding one-time discretionary spending items). F2009 total income tax receipts from individuals were $915B. As a result, if one were to raise individual income tax rates alone to achieve KP financial break-even, one would have to more than double individual income tax rates across-the-board. i USA Inc. | What Might a Turnaround Expert Consider? 357 Drive Growth: If Real GDP Grows 0.1 Percentage Point Faster Than Current CBO Projection For F2011-F2020E, the Budget Deficit Could Shrink by 5% Without Other Policy Changes e CBO analy