Post 7 - the Deficit
Many political scientists would argue that the American public voted in the midterms that they were concerned about the economy and the deficit. Many current and newly elected members of Congress are arguing they have a mandate to be budget hawks.
- To what degree do you think the deficit is a serious political concern? Should it be our TOP priority now or should we wait until after we get out of this recession?
- What tactics should the federal government take to reduce our deficit?
- How likely is it that the federal government will take significant steps in the next two years to reduce the federal deficit?
This is due on Friday, December 17th.
Labels: deficit
posted by maby-keirstead @ 10:31 AM
30 Comments:
I just wanted to let everyone in the class know that my last blog post was incorrect Kathy “Long-Term” Carr did indeed get into Northwestern. I also wanted to say that while all of you guys are stressing about the Supreme Court paper, well quite frankly I’m done, first in both categories. Anyways let’s get onto the blog post.
The United States Government better look at what they are doing carefully. The budget deficit is a very important item to deal. We still don’t have a budget set for this fiscal year. Yet, there have been some strides to get some of the tax issues taken care of. President Obama has considered some compromise with the Republican’s during this lame duck session. He has decided to extend the Bush Tax-Cuts for two more years. (1) My point from this was that during this lame duck session Obama has wanted to work on other policies and topics. He really wanted to work with the START Nuclear Arms treaty, but policymakers made sure he got the tax issue taken care of. (1) This just goes to show that the budget deficit should be our top priority because we are in a whole right now. I do, however, believe that we can get out of the deficit. We are technically out of the recession, but our growth rates are slowly inching their way up the scale. Basically, the growth hasn’t been that significant. It will be interesting to see in the upcoming months what happens in this lame duck session.
There are many tactics that policymakers can do to get us out of the budget deficit. A lot of economists believe that we should do more expansionary policies because that will stimulate the growth of the economy. Many economists want to have substantial growth in increments. They believe that it would be the best if we could mix short-term, medium-term, and long term to help stimulate the economy for the long haul. (1) Some of the tactics that economists are saying that we should endorse are returning to the Clinton-era estate tax rates, extend the Bush Tax cuts, and endorse a new Carbon Tax. (2)
I believe that the Federal Government won’t take that many strides to try and fix the deficit in these next two years. We have already seen in the policy makers that they are extending to tax cuts just for the start of the next term for the president. (1) I feel that the policy makers are trying to make it so that they can worry about other topics, yet in my eyes, I feel that are number one priority should be taking care of the budget deficit. Other sources do indicate that they will be working very hard to pass some legislation. I’m a little skeptical because I think there will be too much political gridlock in this lame duck session. (3)
Sources:
(1) http://www.economist.com/blogs/freeexchange/2010/12/fiscal_policy_0
(2) http://www.greenvilleonline.com/article/20101212/OPINION/312120016/Do-Americans-have-the-will-to-fix-the-federal-deficit-
(3) http://www.presstv.ir/detail/155088.html
Post #7- The Deficit.
The definition of the deficit is “the amount by which a sum of money falls short of the required amount” (1). In terms of the American government, it is when spending exceeds income, putting the duty of budgeting into a serious pickle. Despite worry about the nations exceptionally large deficit, why should American’s care? Is it really that big of a deal? As of now, the yearly federal deficit amounts to over $1.2 trillion (2). Despite this, recent polls have shown that Americans are more than willing to increase the deficit under certain circumstances. The poll showed that although American’s do want to decrease the deficit, they are generally more concerned with economic growth and tax rates (2). Because of this, they are willing to increase the deficit to ensure economic growth and stable tax rates, which makes sense in a way, since the economy of the U.S. hasn’t been the greatest in the last few years.
I am of the opinion that the deficit is a very important thing. Regardless of how much money the deficit amounts to at a certain time, I think it is important to keep track of it and understand why the deficit is the amount that it is at any given time. The amount of deficit leads to the amount of debt. When income doesn’t make up for spending, that invariably leads to debt, which we have a whole lot of as it is. Although I think that added social benefits among other things are a good thing, I think, in an ideal world, it’s the government duty to prioritize what they think is most important. The deficit, as this point, should be addressed before the government goes off and spends more money than they have. Despite my belief, polls show that 82% of Americans oppose cuts to Medicare and 80% oppose cuts to Social Security (2). In terms of this belief, I’m going to take more of a Conservative stance- I feel like the American people are somewhat spoiled. They like the accessibility to Medicare and Social Security and if either of those programs was given cuts to help balance the budget, people would start to whine. But neither of these programs was mentioned in the Constitution and therefore the government doesn’t have an explicit duty to give it the same amount of money each year. Sometimes cuts are necessary, and I think when looking at getting rid of the extreme amount of money in the deficit today, some cuts should happen to social programs. It may not be ideal and many people will not like it but this government wasn’t created for just you or just me. It concerns everyone and it has a budget and aspects of that budget need to be scrutinized carefully when deciding on making cuts or taxing more, ect.
When looking at tactics for reducing the deficit, the government should look at the 1990 budget deal, which was very effective in doing so (3). Under the first Bush administration, this budget deal included cutting spending by $324 billion and raising revenues by $159 billion (2). It also contained powerful methods for controlling future deficits. Another budget deal strengthened the deal in 1993. Though Republicans highly disagreed with each bill (which largely hurt George Bush Senior’s reputation as president, especially after his campaign promise of ‘no new taxes’) the deficit shrank by 4.7% of the GDP in 1992 to almost completely balanced in 1997. Whether people would support a idea like this today is an interesting question to contemplate, but I think this would be something that the government could look back at and attempt to model if they want to be serious about reducing deficit. Whether The Obama administration could accomplish something to the liking of the 1990 budget deal with a House full of Republicans come January is questionable but, seeing as the deficit is so large right now, I think looking at the possibilities are important.
The deficit is a concern for the government. Regardless, if it wants to appeal to the people, it only has to look in the polls to see that people are less concerned about the deficit and more worried about getting the economy back on track as well as not wanting an overly large amount of taxes. Because of this, if the government really wants to cut the deficit they may have to go with their gut instead of with the people. The Senate Budget Committee voted 11-7 to approve a plan to cut the deficit by almost $4 million over the next ten years by overhauling the tax code and cutting spending in many major government programs (4). Despite this vote, President Obama must be involved and agree to the plan if it is going to make its way out of the Senate Budget Committee. Senate minority leader Mitch McConnell stated, "I think the message to us, coming out of this deficit reduction report is that it's time for the president… and people like John Boehner and myself and others to… talk about what we can do to make sure that we have the same kind of country for our children and our grandchildren that our parents left for us." Whether the government will be successful is yet to be seen, but if different members of the government get together and do talk about what can be done, such as Mitch McConnell proposed, the government has the possibility of getting somewhere. Until then, America will have to deal with its overly large deficit.
1. http://dictionary.reference.com/browse/deficit?&qsrc=
2. http://www.examiner.com/political-buzz-in-national/polls-on-tax-cut-deal-shows-americans-really-do-not-care-about-the-deficit
3. http://www.thefiscaltimes.com/Issues/Budget-Impact/2010/06/25/A-Budget-Deal-That-Did-Reduce-the-Deficit.aspx
4. http://www.politicsdaily.com/2010/12/05/obama-needs-to-call-summit-on-the-deficit-top-democrat-says/
For those who do not have the attention span to read more than a sentence or two of a blog post, let me come right out and say it: the budget deficit 'issue' is a myth. Since 1970 (I'm sure this trend goes way farther back than 1970, but this is the earliest year provided by my source), the United States has ran a budget surplus exactly four times: in 1998, '99, 2000, and '01 (1). While we have most likely hit the trough of the recession a long time ago and the five consecutive quarters of positive real GDP growth signify that the recession is over, GDP has only been growing at an average of 2.9% per quarter (honestly, the average is misleading, one quarter of 5% pulled this number up) (2). Real GDP, Y, equals C (consumption spending) plus I (investment spending) plus G (government spending) plus NX (net exports). In order to raise the real GDP and hence, bring about economic growth, the government can tinker with several different approaches. According to John Maynard Keynes, unemployment occurs as a result of there not being enough aggregate demand in an economy to provide jobs for everyone who wants to work (3). To increase aggregate demand, the government can step in and tinker with two components of GDP, and either increase spending or slash taxes; both serve to boost output (real GDP) and aggregate demand, and must therefore also increase employment (3). However, the main idea behind Keynesian economic policy involves deficit spending, an unpopular choice that, like taxes, is a necessary evil to ensure functionality of the government. SUMMARY: Cut taxes/raise spending, worry about budget deficit later.
The time to worry about reducing the budget deficit and national debt is when our economy is performing well. In fact, the biggest knock against President Franklin Roosevelt (my favorite modern President, for those who were wondering) was that he was too conservative, because his top priority was balancing the budget (4). As we all know, we spent just about all of FDR's Presidency mired in this little recession called the Great Depression, so the government managing its funds to make income match expenditures did absolutely nothing to contribute to economic growth. It was not until the build-up and entrance into World War 2 when Roosevelt finally frolicked into the wild and wacky world (to steal Ms. Aby's favorite phrase) of deficit spending that things finally started turning upwards for the American economy (4). SUMMARY: Worry about the budget deficit later, now is not the time to be cutting back.
Honestly, I do not feel that the government will make a real, concerted effort to reduce the budget deficit in the coming years. We can already see this shining through with the extension of the "Don't-Call-It-Bush" (ha, ha, for those of you who read current events) tax cuts. Tax cuts may be popular gestures to the American people, but reducing revenue for the government is not an effective strategy for reducing a budget deficit. Because there are enough Congressional Democrats still in office and because nobody in Congress dares touch Medicare or Social Security, I can't realistically envision any drastic spending cuts coming in the near future.
Sources
(1) http://www.cbo.gov/ftpdocs/108xx/doc10871/historicaltables.pdf
(2) http://www.tradingeconomics.com/Economics/GDP-Growth.aspx?Symbol=USD
(3) http://homepage.newschool.edu/het//essays/keynes/keynescont.htm
(4) http://www.landandfreedom.org/ushistory/us19.htm
Though our country has gone into debt countless times over the centuries, no time has seemed so intimidating as it does today. It is estimated that by 2025 the country’s federal revenue would only be enough to pay for interest payments and entitlements, everything else will need to be payed for through borrowed money. This is only if the national deficit is allowed to grow as it has been, if the recession continues as it is (1). At this moment, debates rage across the country, everyone is trying to figure out how we can save money, and at the same time, how we can save our economy from falling apart.
The question is more complicated than it seems, while Democrats fight to lower tax cuts and work to increase the federal revenue, Republicans assert their belief in tax cuts and “trickle-down” economics, as well as cutting federal spending. The real question is whether or not the decreasing the deficit is more important than getting our country out of our recession.
To me, the two go hand in hand. I believe that to get our country out of the recession, we need to decrease the deficit. If the deficit is decreased and all our debts are paid off, then we don’t need to worry about it, and can instead concentrate on getting our people back on their feet. I think that this requires a strategy similar to the one that Franklin D. Roosevelt used to get our country out of the Great Depression. I think that our country needs to do more to create jobs and get people buying things again.
To decrease the deficit, I favor the Democrat’s plan. I think that their systematic eliminating of the Bush tax cuts, a “roll back” on mortgage deductions for second homes and mortgages over $500,000, and other similar means would do wonders for our flailing economy (1) Their plan would decrease the deficit by nearly $4 trillion through 2020, while extending the Bush cuts for the same time frame would add $4 trillion to the deficit (2).
(1) http://www.nytimes.com/2010/12/05/weekinreview/05bai.html?ref=politics
(2) http://www.nytimes.com/2010/11/11/us/politics/11fiscal.html
With the United States of America in a debt that is over 14 trillion dollars, the federal budget is and was a major concern for candidates who were newly elected into the Senate and House. However I don’t think that the deficit should be Congress’ top propriety right now. The reason I think this is because one of the only ways that the government thinks that they can get out of this deficit is through slashing budgets to programs. However, this may be difficult because in the most recent NBC/Wall Street Journal poll they found that 70 percent of adults say they are uncomfortable with cuts to Medicare, Social Security, and defense programs (1). And a solid 59 percent of the adults surveyed rejected increasing taxes and eliminating popular deductions (1).
But this then brings us to the issue on what should the government actually do about our budget deficit since much of the general American public doesn’t want to increase taxes and decrease the budget to programs. Well, I think that if Congress is extremely set on balancing the budget they should make budget cuts, and lots of them. An example of this is national deficit of Canada in the 1990s. Canada undertook series of radical budget cuts. The 1995 federal budget cut one-third of payments to the health care plans run by the provinces, slashed the civil service by one-quarter, and instituted a 10% across-the-board cut in other discretionary programs (2). Two years after these slashes in the budget, Canada’s had a balanced budget and operated in surplus, that is, until the recent severe recession (2). But to me all these slashes seem a little extreme, even though they may help balance the economy. I still believe that Congress should just wait until the recession is over to actually take any real steps to fixing it. Though, Washington has already taken steps to try to fix the budget by having the Senate approve the 858 billion dollar tax plan that was the first compromise in the new era of divided government and acid compromise (3). This is just the first of from what I can tell many more compromises the Democratic Party and Republic Party will be making regarding the budget deficit.
1. http://www.philly.com/dailynews/opinion/20101216_Young_people_have_to_speak_out_on_the_federal_deficit_crisis.html’
2. http://www.industryweek.com/articles/the_competitive_edge_the_federal_deficit_comes_into_focus_23444.aspx?Page=1&SectionID=3
3. http://www.nytimes.com/2010/12/16/us/politics/16cong.html?ref=us
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“The deficit and debt are like a cancer, and it’s going to destroy our country from within” (1). The national deficit is very serious. Both conservatives and liberals agree that the growing deficit could lead to serious problems down the road. The annual federal deficit now tops $1.2 trillion and the federal debt is over $13 trillion (2). The deficit represents an unusually high level of GDP. However, the deficit shouldn’t be the top priority now. Americans agree that getting out of the recession should take precedent. A recent poll from ABC News and the Washington Post state that many Americans are more than willing to increase the deficit under certain circumstances. The poll was taken to see if Americans approved of the GOP and President Obama’s tax cut ideas. They have 69% of Americans supporting the tax cut deal and just 29% opposed (2). Increasing the deficit should stimulate the economy, and get Americans back on their feet. If the government only focuses on the deficit, the economy will never be healthy again.
Conservatives say that the government should cut back on the government expenditures. However, the defense spending, Social Security, Medicare, and debt payments make up over 64% of the federal budget. Balancing the budget is impossible without cutting these programs which the majority of Americans are in favor of. The federal government should focus on renewing Bush’s tax cuts. History shows that cutting taxes on the rich is the best way to boost jobs. “Taxes were cut on high-income earners in the 1920s (Coolidge), 1960s (Kennedy), 1980s (Reagan) and again in the 2000s (Bush). These cuts benefited the rich and everyone else. In all these cases, jobs boomed after tax cuts” (3).Profit occurs when revenue exceeds expenses. The problem the federal government has is too much spending. Reducing the spending and bringing in revenue is a way the national deficit will be reduced.
It is unlikely that the government will take significant steps in the next two years to reduce the deficit. The new Republican control of the House may give government a slightly bigger chance, but not much. Decreasing revenue by cutting taxes will not help the deficit(4). It is necessary however for the economy to stabilize. Government officials will focus more on getting out of the recession than reducing the deficit.
1. http://www.theolympian.com/2010/12/16/1475991/congress-needs-to-pay-attention.html#ixzz18Jx6piPK
2.http://www.examiner.com/political-buzz-in-national/polls-on-tax-cut-deal-shows-americans-really-do-not-care-about-the-deficit
3.http://www.timesrecordnews.com/news/2010/dec/13/cutting-our-government-size-will-reduce-the/
4.http://biggovernment.com/tcampbell/2010/02/10/we-can-do-much-more-to-reduce-the-federal-deficit/
Warning: way too much AP Econ talk in this post.
What an awful situation to be in: a rapidly rising deficit, adding on to an already astonishing national debt (almost 14 trillion! TRILLION! (1)), in the worst recession since the Great Depression (2). As they are wont to do, politicians have been arguing about which of these problems is greater. Republicans, being economically conservative, have been badgering Democrats about the rising national debt ever since Obama took office, while Democrats have been trying to spend money in an effort to get us out of the recession. But which concern is greater?
Looking for an answer, one turns to economic theory. But first, it must be noted that tax cuts and government spending add to the deficit/debt, while tax increases and cuts on spending take away from the deficit/debt. Anyway, a recession, as defined in economic terms, is when GDP is growing at a below-average rate. The way government can raise the level of GDP growth is by giving tax cuts and increasing spending. As I noted above, though, those things increase the deficit/debt. So the question is again raised, which problem is worse? Well, just as the actions that add to the deficit also increase GDP growth, the actions that take away from the deficit decrease GDP growth. The longer we spend in a recession, the more time it will take to fully recover from it. I would argue that it makes more sense to recover more quickly and then tackle the debt, than it is to tackle it now and spend more time in which the poor state of our economy is depriving people of jobs. Once we recover from the effects of the recession, we’ll be well set to cut spending and raise taxes. That’s not to say the deficit/debt is not a serious concern, just not one that is as serious as the recession.
If we absolutely had to try to attack the deficit, my personal opinion for targets would be typical liberal targets: high income taxes and defense spending. The government’s budget for 2010 defense spending was $663.8 billion (3), which I would argue is ridiculous. With the deficit for the year being $1.29 trillion at the moment (4), it seems completely unreasonable that something about half as large as the deficit cannot see substantial cuts in order to attack a deficit that massive. In addition, as of 2009, the top 1% of the country controls 42% of the wealth in the country, with the top 2% controlling well over half (5). While taxes are already progressive, even higher progressive taxes would see an enormous increase in tax revenue and a large dent taken out of the deficit.
Being perfectly frank, there’s never a high likelihood that the government will enact policies to reduce the deficit/debt. The policies which do so (lower spending on government programs and higher taxes) are perpetually unpopular. Looking at the next 2 years, it’s especially unlikely due to the divided government coming into play soon. The Democrat Senate/president will resist spending cuts, and the Republican House will resist tax increases. What will most likely happen in the next two years is fairly high deficits while we get out of the recession, if slowly.
1. http://www.brillig.com/debt_clock/
2. http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aNivTjr852TI
3. http://www.defense.gov/releases/release.aspx?releaseid=12652
4. http://www.reuters.com/article/idUSTRE69E54M20101016
5. http://www.mybudget360.com/top-1-percent-control-42-percent-of-financial-wealth-in-the-us-how-average-americans-are-lured-into-debt-servitude-by-promises-of-mega-wealth/
PART I
The deficit is a serious issue.....duh. While the holiday season has opened up
consumers pocket books there is no denying that a massive budget deficit looms over the Federal government (3). In November retail sales jumped .8%, with department sales rising 2.8% the largest gain in over two years (3). Another good sign is that inflation remains under control (3). But, I think we would be kidding ourselves to think that the deficit is going to disappear (on my Christmas list btw). Currently the budget deficit for the fiscal year sits at $1.294 trillion, which is down from a record $1.416 trillion last year (5). We saw what happened to consumers and to the rest of the economy when consumers borrowed too much...now imagine that happening to the government. On top of all that our paying the interest to our national debt is a significant chuck of our current budget. We can wait a little longer....but not that much longer. There’s no need to leave the budget as a lingering issue.
Tax more, cut spending, and reduce imports. I’m all for compromising, however tax
cutting and increased government spending does not work for me. Let’s just say that I’m one of those people that feels that the government does not like to make hard compromises because they fear job security...term limitations anyone? We all know that Americans want the best of both worlds, low taxes and the government helping out as many people as possible, but right now I don’t see how this is a fiscally responsible activity. While it does have benefits in the short-term, you all know that I like to think in the long-term (1). Back to my main argument, the tax package being debated right now has the largest price tag of any stimulus package in history (2). The price tag of $858 billion is hard to swallow for those who believe that government spending is a little out of control (Yep, I just said that.) (2). Extending Bush era tax cuts will cost the government $330 billion dollars, and let me add that under this plan the United States slipped into its worst budget deficit in history. There is also a section regarding the estate tax and while this will only cost the government $68 billion, it only effects a few thousand already affluent people who are less likely to spend their tax savings (2). Also included in the stimulus package is a tax cut for employers investing in plants or equipment, but this idea might not be too helpful because businesses are still hesitant to spend with consumer spending not quite stable (2). I really like the idea of investing in items like infrastructure and giving more aid to state and local governments. These ideas appear to have a greater chance of stimulating long-term growth and local and state governments are generally more in tune with what their constituents want (based solely on the fact that they are closer to the people, and are more likely to have similar interests) (2). I also think that reducing the trade gap could be an efficient way to help stimulate the economy. We as a country are so dependent on China and other countries that give us cheap labor, however importing all these goods is not going to help us create jobs and in turn exports. I feel really great knowing that the one of the only aspects driving foreign demand for US goods is that the US dollar is falling (4). YAY!!!! This needs to change.
PART II
Chance that President Obama will take steps to shrink the federal budget in the next two years, high. Chance that anything will get passed the Republicans in the House and Senate, medium. Obama is clearly taking risks in his Presidency. Passing the health care and now attempting to pass the stimulus package are bold pieces of legislation. But, I think President Obama is being a little too nice and rosy with the Republicans. We need to cut spending and eliminate those pesky tax cuts to aid in the depletion of the budget deficit and I don’t see any compromising in the near future. Obama is willing but I don’t think he is able.
(1)http://www.marketwatch.com/story/imf-chief-backs-us-tax-deal-2010-12-16?reflink=MW_news_stmp
(2)http://money.cnn.com/2010/12/16/news/economy/tax_cuts_economic_impact/
(3)http://www.time.com/time/business/article/0,8599,2036866,00.html
(4)http://abcnews.go.com/Business/wireStory?id=12412909
(5)http://abcnews.go.com/Business/wireStory?id=12367150
(6)http://www.time.com/time/magazine/article/0,9171,2036383,00.html
The deficit should be a serious political concern because polls say that the budget is a big issue, and solving the deficit is also important to the nation’s ability to function properly. The American public believes that the deficit is "dangerously out of control" (5). If the US continues this high level of debt, the Congressional Budget Office believes that the level of debt will continue to grow for later generations, would increase federal spending on interest payments, make it harder for Congress to respond to unexpected crises, and the government would have to pay higher interest rates on their loans (3). The overall functioning of the US government relies on its ability to have access to funds and have the ability to pay for services. Managing the deficit needs to be the top priority of the government to minimize the long term consequences.
The federal government should reform the tax code to reduce the national deficit. Keeping the Bush tax cuts as they are now will lead to a deficit in 2015 that will be $400 billion more than what the US can reasonably sustain (2). The tax code today is excessively thick with loopholes and wasteful deductions (3). Reforming the tax code would increase the flow of money into the government. If the tax code was reformed to include fewer deductions and lower rates, productivity would increase and fuel people to make more money instead of just seeking ways to receive more deductions (3).
The Democrats and Republicans have been talking about increasing taxes and reducing spending, and if they could complete most of their goals, they could cut almost 1/3 of the deficit (2). But the federal government should not stop all of its spending. It is important to have some small short term spending to benefit the economy in the long run through cash flow and spending. But big changes are not likely to happen soon, as the Democrats and the Republicans have very different beliefs on how to reduce the deficit and with the changes being made after the midterm elections, new plans will have to be made.
1)http://www.huffingtonpost.com/dylan-ratigan/get-america-working-we-ne_b_797005.html
2)http://www.nytimes.com/2010/11/14/weekinreview/14leonhardt.html?_r=1
3)http://economix.blogs.nytimes.com/2010/12/10/a-gentle-nudge-about-the-deficit/?scp=2&sq=deficit&st=cse
4)http://www.nytimes.com/2010/11/17/business/economy/17leonhardt.html?scp=7&sq=deficit&st=cse
5)http://www.bloomberg.com/news/2010-12-10/washington-day-ahead-poll-shows-americans-want-deficit-cut.html
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The U.S. has a spending problem and party will take a stand on the issue. Democrats are willing to cut spending in certain cases and raise taxes to increase revenue, but they immediately use those savings to spend more. Republicans on the other hand believe that it is always time to cut taxes. The policies of both parties have led the nation to rely increasingly on borrowing so the government can continue it’s addiction to spending.
The deficit should be a major concern for people of all ages and income levels in America because it will affect everybody if it is not controlled. People are looking at the short-term though. The economy is showing signs of life and the recession has bee over for a while I believe that if we got tough on the deficit now it could ruin the economic recovery.
The federal government will have to make difficult decisions on all aspects of the budget if it hopes to eliminate the deficit. I believe that the Deficit-Commission’s recommendations would be a great start in this process. The commission’s proposal cuts 3.89 trillion dollars from the budget between 2012 and 2020. (1) The benefit of following the proposal is that no of the cuts occur until 2012. This allows for ample time for the economy to recover. The commission simplifies the tax code, reduces deductions, raises the social security age in the future, changes rules on retirement and Employee provided health care. This will not be enough to balance the budget there must be increased taxes or more cuts in spending. Obvious ways to cut spending would be to get out of Iraq and Afghanistan, and radically change entitlements. Taxes could be raised by letting the Bush Tax Cuts expire. Remember President Clinton had a balanced budget with those tax rates and the economy was doing very well.
I find it highly unlikely that the federal government will take steps to control the deficit in the next two years. The recent tax deal is a perfect example both parties could have made the tough choices which would of reduced spending, both parties did not and the trend continues of avoiding the problem (2)
(1) “Report from Deficit-Commission Chief Urges Tax, Spending Changes”
http://online.wsj.com/article/SB10001424052748704594804575648503541856136.html
(2) “Tax Deal on the Verge of Passing”
http://online.wsj.com/article/SB10001424052748703395204576023772342189318.html?mod=WSJ_hp_LEFTTopStories
I think that we should be focusing on the deficit as one of the top political concerns, since we our technically out of a recession. The National Bureau of Economic Research formally defines a recession as three consecutive quarters of falling real gross domestic product [1]. Currently the current debt is -$ 13,944,201,146,442 and growing every second [2]. And although people may think that the recession isn’t over because they can still feel its affects, GDP is growing [3]. If we aren’t able to get out our enormous deficit we will end up in a worse economic crisis then we had during the time of recession. That’s already occurring currently in Europe where several countries are facing problems because of their finical deficits.
First the government needs to make ajustments to social security, such as raising the age for benefits or reducing benefits for higher income people, because social security is one of the largest contributors to the deficit [4]. Second, Healthcare reform plan that will reduce cost , not increase cost such as Obamacare, needs to be created[6]. Third, across the board reductions need to be made in all federal programs because we cannot afford the levels of spending that are occurring[5] . Fourth. we need to end the wars in Afghanistan and Iraq. And after all the above are implemented, and we still do not see sufficient results, it may be necessary to increase taxes[4].
I think that the federal government will take significant steps within the next two years, because it is an important issue to people and has receives a slew of media attention since the disaster on Wall Street in 2008. Also the recent midterm elections, where the republican and Tea party candidates had large amount of victories, had great success running on a deficit reduction platform.
[1] http://financial-dictionary.thefreedictionary.com/Economic+recession
[2] http://www.gpoaccess.gov/usbudget/
[3] http://www.tradingeconomics.com/Economics/GDP-Growth.aspx?Symbol=USD
[4] http://reason.com/blog/2010/12/16/jon-chait-watch-libertarian-va
[5] http://www.tnr.com/blog/jonathan-chait/80060/only-twenty-four-percent
[6] http://www.redstate.com/laborunionreport/2010/12/16/repeal-obamacare-then-lets-do-something-really-radicaltry-freedom/
The issue of the federal deficit is a very hard one. If we ignore the deficit and engage in expansionary policies like increasing government spending and cutting taxes, the economy will recover faster, but we will be digging ourselves far deeper into debt. However, if we only focus on the deficit and engage in contractionary policies like cutting government spending and increasing taxes, the deficit will decrease, but the economy will slow down [1]. There are terrifying consequences of having a large federal debt. If we keep borrowing money from other countries, we could lose our rank as the world's leading economic power, interest on the debts could eat up a large amount of each year's budget, and the quality of life for Americans would decrease [1]. They could also drive up interest rates and depreciate U.S. currency [1]. But any deficit-reducing policy is likely to increase unemployment and slow down economic growth, which can be equally undesirable [1]. So should we fully focus on the federal deficit, or should we ignore it and only be concerned with economic growth? I think that the best solution today is to be somewhere in between: The growth of the economy is still an extremely important issue, but considering that the recession is technically over, there needs to be some limit on the federal budget.
The two things the government can do to reduce the deficit are also the two things that Americans despise the most: Increase taxes and reduce spending. One of the biggest things legislators are looking to cut is Social Security, which makes sense because it is the single largest component of government spending today. Although often considered "untouchable," many economists are insisting that there is absolutely no way we can effectively reduce the federal deficit without making some changes to it [2]. Some suggestions for reducing the cost of Social Security are increasing the retirement age and reducing the cost-of-living increases [3]. The debt reduction committee has also come up with some other solutions: reduction of military spending and decreasing the amount of tax loopholes [4].
There will be a lot of disagreements, but I don't think Congress has much of a choice in whether or not to take significant steps to reduce the deficit in the next two years. I think that Social Security will definitely be one thing that Congress will attempt to fix. Both parties are concerned about the cost of Social Security, but the Democrats are looking more into increasing Social Security taxes, especially for the rich, while Republicans are looking at reducing spending[5]. Plus, Mr.Trusinsky said that he thinks Congress will make changes to fix Social Security because the solution is "very easy," so I think I'll take his word for it. I can not be too optimistic about Congress doing anything else significant to reduce the deficit in the next two years.
1)http://www.nytimes.com/2010/02/07/opinion/07sun1.html?_r=1&sq=deficit%20editorial&st=cse&scp=1&pagewanted=all
2)http://abcnews.go.com/US/fact-check-hard-steps-ahead-reduce-federal-deficit/story?id=12289729
3)http://www.cbsnews.com/stories/2010/05/18/business/main6494282.shtml
4)http://www.timesrecord.com/articles/2010/12/16/opinion/commentaries/doc4d0a4ca055124552300761.txt
5)http://abcnews.go.com/Politics/federal-deficit-congress-cut-medicare-social-security-raise/story?id=11252928&page=2
May I clarify that I did a project on budget deficit, and I would like to clarify that the budget deficit is much different from debt. The deficit is defined as losing more revenue than receiving revenue in one fiscal year. The debt is the deficits and surpluses added together over many years. With that being said, I do not believe that deficits are a serious political concern. Especially this time of the year, November is a typical month for a budget deficit (1). The fact that the deficit has been for 26 consecutive months doesn’t even worry me (1). The problem really becomes when we have many deficits over years and years which builds up. In addition, I believe that there is an internal economic regulator and clock which is designed to get us in and out of recessions time after time. Although I wouldn’t say that our actions are merely catalysts, I will claim that the actions we take to control deficits are mostly catalysts, and that nothing much changes in the economic roller coaster except for its speed. Getting out of a recession I believe is not our biggest concern, because the time will come on its own. Concentrating on other issues and in the meantime being fiscally responsible about our pecuniary matters. This is not to say that the deficit is the least of our concerns either. The U.S. deficit forecast was raised from an estimated $996 billion to 1.066 trillion for 2011 (2). This is a very big number, but I do not believe it necessarily guarantees that Americans have an unsolvable problem on their hands. I simply think it means thatthe deficit is not the smallest problem we as a country are facing.
I believe that the federal government should, to reduce both the deficit as well as the amounting debt, lower taxes. This has become official this week, even with Obama in office. I am super ecstatic that he has “given in” to us Republicans. He even cut taxes for the top ten percent! What a great deal! I believe this is a smart way to deal with the deficit because even though the government has, at first glance, given away some of its revenue by reducing taxes, we can see that people will have more money to spend. This means that the wealthy have a lot more money to spend and can put the money back into the economy. To me this is the main reason the economy works. It is a system of buying and selling, stocks and trade, up and downs. As long as the money keeps flowing through all parts of our economy, I see no need to worry. I do believe that the cutting of some monetary funds to programs is necessary, however, and that agreements on all sides are needed to make good decisions (3). As much as I hate to say it, tax cuts may not always be the answer. If we cut programs or parts of programs instead this would solve many problems. Unfortunately however, this is often very unpopular. independent.co.uk/news suggests, for example, that a raising in petroleum tax rate may be necessary but a fall in other taxes is also a good option (3). Both Republican’s and Democrats will have to make sacrifices in order to do something uncalled for: compromise. Also, one more point, after Trusinky’s class: Trusinsky told me that he believes either the Republican’s or the Democrat’s idea would solve the budget deficit problem. After carefully considering this, I do agree with the statement, even if I do opt more for the Republican way. The real problem is that we have a divided nation which has a hard time agreeing with another on issues. If there was only one way to collect revenue, I think the issue would be a lot simpler, because there would be only one way to solve the problem. Since there is a balancing act involved, however, that is where the real argument begins. Collecting revenue is collecting revenue to me. If the government collects more revenue than the money it spends, then the problem is solved and we have a surplus. I do believe the better way to collect revenue is the Republican way, but I also acknowledge that the Democratic way would work, too. Just Democrats, don’t bog us down with too many taxes!
It is likely that the government will start taking more steps to reduce the budget deficit. I do not believe that the steps will necessarily be a good thing, however. I feel the government sees the steps as a way to get more votes at the election. Since the government has many high risks for their parties, I believe that they will take steps to reduce the budget deficit-but not necessarily for the right motives. The government is a partisan community. Therefore, the Democrats are going to feel relieved to start raising taxes after a while. I think that Democrats have a strategy to reduce the deficit at the benefit of their party. If a were a Democrat running for reelection the first thing I would do is cave in a little to Republican demands so that more conservatives and moderates would warm up to me. After the Republicans warmed up a little and the economy and deficit started looking better, I would switch back to pleasing the Democrats. In other words, the Democrats will probably start trying to solve the problem but then this situation will once again turn into a sloppy fight over who’s right. That is the real point when we will not get anything accomplished. Also, I think it will be hard to take steps to solve these monetary concerns due to the divided government.
1.) http://online.wsj.com/article/SB10001424052748704457604576011683555582342.html
2.)http://www.bloomberg.com/news/2010-08-19/u-s-budget-deficit-forecast-increased-by-cbo-to-1-066-trillion-for-2011.html
3.)http://www.independent.co.uk/news/world/americas/cutting-the-us-budget-deficit-will-require-sacrifice-by-all-2131820.html
The Federal deficit is a very important political issue right now. Some people believe that it is the most crucial problem facing the United States. For years the policy of the federal government has been spend now, commit to saving later(2). The deficit has been increasing quickly in recent years and is believed by many to be out of control(1). As of now the deficit has not caused as many problems for the United States as it has for other countries like Greece, Ireland, Spain, and Portugal in part because we have our own currency(2). However, if the current rate of deficit spending continues, the United States will be in trouble(1).
Although the federal deficit is a big problem for the country at this time, I do not think that it should necessarily be the number one priority. The government should consider how all of their actions will affect the deficit, but I don’t think that the government should immediately make drastic changes because they could have a negative effect on other policies and programs. America is emerging from the recession, but I think it would be a bad idea to dramatically raise taxes and cut programs just as the economy is starting to improve. Federal Reserve Chairman Ben Bernake supported this position when he said “We don’t want to take actions this year that will affect this year’s spending and this year’s taxes in a way that will hurt the recovery”(2).
To reduce the federal deficit, I think the government should cut spending while making minor tax increases for the very wealthy. A proposal recently put forward by the debt reduction committee involved reducing the military budget, eliminating tax loopholes, and simplifying the tax codes(1). Some committee members did not support this proposal, but the objectors were split evenly between Republicans and Democrats. This shows that the proposal has a good chance of being passed by Congress(1). I think one way that the deficit could be significantly decreased is by raising the Social Security and Medicare age to 70. This proposal makes sense due to the United States’ aging population. The government cannot continue to support so many senior citizens without reforming these programs.
I do not think that the federal government will make many significant steps on this issue in the next two years. There is no question that the problem of the federal deficit has risen in importance to become a major issue, but I think that controversy over how to solve the problem will limit the progress of solutions. While Republicans want to cut spending, Democrats want to increase taxation. These two opposing viewpoints are difficult to reconcile. Obama recently adopted continuation of tax cuts and spending increases, but this compromise can only result in more debt(2). At this point, I find it unlikely that government will decide on a suitable method for decreasing the deficit anytime soon. Even though the deficit consistently shows up in the media and has become a serious political issue, the deficit continues to grow. The question is how bad things have to get before the federal government can finally compromise and decide on a real solution.
1.http://www.timesrecord.com/articles/2010/12/16/opinion/commentaries/doc4d0a4ca055124552300761.txt
2.http://www.washingtonpost.com/wp-dyn/content/article/2010/12/06/AR2010120607285_2.html?sid=ST2010120606249
I’m sorry for implementing AP Econ into this post
Economy is a very important thing to consider in the current situation as the United States debt reaching a record braking 14 trillion and this is just not good for America at all. The Deficit is definitely a serious issue to be considered and politicians should pay wide attention to it. Deficit is a big problem for the United States Economy because in upcoming years it may lead to a poor economy. All of the deficit end up in the government's debt, which is about to hit 14 Trillion which is a high number makes US the country with highest debt. US needs to focus on it and this could be now or never and lead to economy to go down the drain and stay in the drain unless some action takes place.
I think the government should act conservatively in the economy and not increase government spending; even though government spending lead to high GDP growth over time and increase the output and income of the people but by spending more isn't going to get back lot of returns and its not going to lower the debt at all. The expansionary policies may work in putting the GDP back to a higher number but government spending more and more isn't going to help. The no more made in china agenda is needed. The government should put high taxes on imports which would lead to decrease in imports and lower the gap in the trade deficit. The United States imports a ton of things from China imports very little from US. The Trade deficit with china is growing more because companies are finding it cheaper to produce goods in china due to lower labor costs in china. The government should start raising taxes on imports which would overtime make companies start factories in the United States and will lead to rapid decrease in The "Made in China" products. Id there are more industries in United States and Us is producing goods at a higher rate this would lead to a big increase in GDP and will also lower the employment to the natural rate. The Democrats plan in increasing government spending I think is pretty stupid and will lead to destruction in US economy. If the government is not going to do any thing in increasing import taxes this would over time make China dominate the world economy and they would start putting cheap labor factories in US and Americans will have to work for the Chinese factories and I hope not to see it happen. The government also should decrease taxes in the beginning it may seem like not benefiting but over time consumer spending will increase which would lead to the marginal propensity to consume will rise and people will be willing to spend more on goods and the output level will increase and the GDP as well. So to take care of the deficit the government should start solving the equation on lowering trade deficit and decrease taxes. The Democrats need to calm down and look ahead at the future of this country. Do we really want United States to fall back in world economy? I think we need to look at our competitors and figure out ways to dominate in the world economy as a country.
After Republicans gain control in the midterm election I think this is going to get nothing done. Democrats want to increase spending and think this would help the economy but they have to consider the long term growth just increasing spending now would stimulate the economy for a short term but in the long run the government is going to have to keep spending and increase the debt. I think we need politicians to focus on this issue and little bit change may happen but I don’t think there is going to be significant change that would make US economy dominate.
http://www.heraldscotland.com/business/markets-economy/investment-bank-alert-over-fears-of-debt-crisis-in-us-1.1074786
http://business.globaltimes.cn/china-economy/2010-12/602325.html
http://abcnews.go.com/Business/wireStory?id=12412909
http://abcnews.go.com/ad/gmaintroad.html?goback=http://abcnews.go.com/Business/wireStory?id=12412909&tqkw=&tqshow=
The budget deficit will inevitably destroy the country if the government sits by and does nothing. We need to tackle this issue now, even though we're in a recession, before it becomes even worse than it already is. The estimated deficit for 2011 is $1.5 trillion, an all-time high (1). Obama recently compromised with Republicans in Congress to preserve the Bush tax cuts for the wealthy in return for the retention of unemployment benefits (2). The hope is that this deal will create jobs and stimulate the economy, but it is doubtful that these measures will actually work (2). Before the tax cuts, private economists predicted that the deficit would actually decrease. But now, with the $855 billion that the tax cuts will cost the government, the outlook isn't so good (1). The tax bill will probably pass through the House, having already passed overwhelming in the Senate (3).
Many are arguing, and I agree, that preserving the Bush tax cuts is irresponsible and will not help the deficit. We should be following "paygo" rules, meaning that every dollar in spending or tax cuts must be matched in spending cuts or tax increases (4). The Republicans claim that the deficit is being caused by spending, not tax cuts, and thus it is perfectly OK to not raise taxes on the rich (4). I agree that spending is a problem, but it's ridiculous to think that cutting taxes won't cost the government in an enormous way.
The government needs to repeal these tax cuts to cure the deficit. The argument in favor of the Bush tax cuts is that if people are paying more taxes, they'll spend less and the economy will suffer. But these taxes are for the very top income bracket, and I don't think the wealthiest people in the country are going to be particularly phased by a slight tax increase. I admit, I don't have a source to back that up, but come on, do I really need one? Anyway, though it would be best to raise taxes, it's definitely not going to happen any time soon. The Democrats have completely given up any hope of changing the tax bill, and the House will most likely pass it (3). I don't think people are worried enough about the deficit, and they won't be worried enough until it's too late.
1. http://abcnews.go.com/Business/wireStory?id=12369319
2. http://www.benzinga.com/10/12/708595/tax-cut-deal-enough-to-boost-jobs-analyst-blog
3. http://www.washingtonpost.com/wp-dyn/content/article/2010/12/16/AR2010121606200.html?hpid=topnews
4. http://voices.washingtonpost.com/ezra-klein/2010/12/republicans_are_not_fiscally_r.html
I agree that the national deficit is a major concern. The national debt just recently exceeded $13 trillion, and is said to go over one hundred percent of the GDP this coming year(1). This is a significant problem. Our countries habit of spending money that we don’t have is a bad one. This issue with our growing debt will continue to get worse, and create a never-ending maelstrom for our countries economy. I don’t think we should wait to address the issue, even though we are in the midst of a recession. This problem will only get worse and will get harder to fix, the longer we wait. If the United States fails financially, then the whole world fails. That is intense.
There are a number of ways that the U.S. can reduce their federal budget. One man, says that we should cut spending by decreasing the size of government(2).In essence, we should lower the amount of government agencies, programs, aids, etc. By doing this we could lower taxes. It is said that this would also increase job opportunities. It was noted that decreasing taxes on the rich Americans boosts jobs(2). Another way to reduce the budget is to create a more efficient system. Some ways that were suggested to bring about an efficient system were restructuring the education system, allowing government employees to be fired, fixing the healthcare system, and simplifying insurance(3).
I think it is quite likely that the government officials will give fixing the budget a prominent role in the next few year’s agenda. So many citizens are concerned with the enormous debt the government has accumulated over the years, and I believe that the people would have an uproar if they felt that something wasn’t being done about it. The newly elected officials is this year’s midterm election said that they have a mandate to the people to revise the budget, so I think that is what they are going to try to do.
Sources:
(1)http://www.americanthinker.com/2010/06/americas_predicament.html
(2)http://www.timesrecordnews.com/news/2010/dec/13/cutting-our-government-size-will-reduce-the/
(3)http://www.associatedcontent.com/article/6076358/seven_ways_to_reduce_the_federal_budget.html
For those who do not have the attention span to read more than a sentence or two of a blog post, let me come right out and say it: I want to outright quote the first sentence of Eric A’s blog post. I won’t- that’s his thunder, and I figure I already stole enough of the first line anyway. However, as Eric A forgets, there are certain advantages to doing one’s blog post, let’s say, “non-early.” The raging current events debate about this topic has gotten juicy as the week has gone on.
This blog post is mostly about the national debt, with a few mentions of the deficit mixed in. I assumed that, for the purposes of this blog post, the distinctions are blurred and both are assumed to mean “government owes money.” That’s the conclusion I came away with from Facebook, anyway (10).
To what degree do you think the deficit is a serious political concern? Should it be our TOP priority now or should we wait until after we get out of this recession?
Indeed, the huge size of the national debt is a serious concern. That the United States has succeeded for decades with growing debt does not mean it will avoid consequences in the future. In my opinion, the United States is playing chicken with a train, risking the loss of global domination by continually borrowing the funds it needs to ensure present prosperity (3). Recently, investment groups that rate international credit have considered downgrading the United States’ credit rating from the highest, citing the growing debt (4). Such a move would make it harder for the United States to obtain loans.
However, any sufficiently significant debt reduction tactics fly directly in the face of Keynesian economics, at least as should be pursued during a recession, and will certainly hurt the shaky economy if suddenly implemented (2). For the half century that newspaper articles can be Google searched, terrified ranting about the massive fire-breathing deficit dragon is widespread (1). In 1969 the end was not nigh, and the same is probably true now. Although it is a significant issue, when it comes to national debt there is no immediate crisis at hand. Concerns about the deficit certainly take backseat to recession policies, which will ensure the government HAS an economy to draw revenue from in the future.
What tactics should the federal government take to reduce our deficit?
The fundamental actions which the government must take to reduce the deficit are spending cuts and increased taxes. Neither of these policies, unfortunately, is at all popular with voters. In addition, much of government spending and taxation is mandatory: only about 1/3 of the Congressional budget is not. I personally prefer that the federal government raise taxes, especially where they can be beneficial such as is the case with a carbon tax. However, spending reductions will ultimately be necessary to tame the federal deficit. Either move will see harsh opposition from the major parties and the public. This is why I think that legislators should establish automatic deficit reduction measures, such as tax rates which increase as the percentage debt of GDP does.
One anti-deficit policy that Republicans entering the House have championed is a ban on earmarks (6). This is not what the government should be doing to reduce the deficit: earmarks account for less than 1% of the federal budget, and can be used to convince legislators to vote in other deficit reduction measures (7). After passing the ban, many Republicans are questioning it and searching for ways to circumvent it when they take power, citing many of the original opposing arguments to the ban to justify their workarounds (8). Clearly, banning earmarks is a token political gesture.
How likely is it that the federal government will take significant steps in the next two years to reduce the federal deficit?
I’ll quote the 1972 article I cited earlier. “If this year’s debate goes according to form, Congress will point a finger at the size of the national debt, say it’s a shame and ought to be reduced, then go ahead and vote the increase requested by the administration” (9). In other words, there’s not a snowball’s chance in hell it will happen. Part of this is the continued demand for expansionary policy during the recession, and part is that humans are dithering fools who can’t see beyond the next election cycle.
Here comes the fun current events part that Eric A missed: Just tonight, the House of Representatives approved the tax compromise as negotiated by President Obama (11). The compromise is a massive collection of tax cuts (All of the Bush cuts and the estate tax) and spending which will add $858 billion to the national debt. If any of the major players in government were serious about reducing the federal deficit, this deal would have been impossible.
Sources:
(1) “Ritual of Raising National Debt Ceiling Began in World War I” http://news.google.com/newspapers?id=5gofAAAAIBAJ&sjid=GI0EAAAAIBAJ&pg=7188,446858&dq=national+debt&hl=en
“US National Debt Ceiling is Perilous” http://news.google.com/newspapers?id=fklVAAAAIBAJ&sjid=XD4NAAAAIBAJ&pg=4658,81259&dq=national+debt&hl=en
“House Sounds Alarm on National Debt” http://news.google.com/newspapers?id=QksqAAAAIBAJ&sjid=pE8EAAAAIBAJ&pg=3822,3713399&dq=national+debt&hl=en
“Congress to Blame for Rising Debt” http://news.google.com/newspapers?id=wNNFAAAAIBAJ&sjid=nL0MAAAAIBAJ&pg=4155,4120498&dq=national+debt&hl=en
“Senate May Balk At Hiking National Debt”
http://news.google.com/newspapers?id=Q9dWAAAAIBAJ&sjid=2UINAAAAIBAJ&pg=2554,1849789&dq=national+debt&hl=en
(2) See Economics textbook, Ch. 23, or Eric A’s post above.
(3) A fun editorial about this: http://www.cbsnews.com/stories/2010/12/05/opinion/main7121029.shtml
(4) http://www.telegraph.co.uk/finance/economics/7153180/US-credit-rating-at-risk-Moodys-warns.html
http://www.huffingtonpost.com/2010/12/13/moodys-us-credit-rating-o_n_796101.html
(5) “Ritual of Raising National Debt Ceiling Began in World War I” http://news.google.com/newspapers?id=5gofAAAAIBAJ&sjid=GI0EAAAAIBAJ&pg=7188,446858&dq=national+debt&hl=en
(6) http://www.politico.com/news/stories/1110/45724.html
(7) http://www.cnsnews.com/news/article/eliminating-100-percent-earmarks-cuts-fe
(8) http://www.politico.com/news/stories/1210/46172.html
(9) “Ritual of Raising National Debt Ceiling Began in World War I” http://news.google.com/newspapers?id=5gofAAAAIBAJ&sjid=GI0EAAAAIBAJ&pg=7188,446858&dq=national+debt&hl=en
(10) http://www.facebook.com/photo.php?pid=31922534&l=95666bb941&id=1432016783
(11) http://www.cnn.com/2010/POLITICS/12/16/tax.deal/?hpt=T2
Wow, I feel so inadequate next to all these AP Econ students having not taken Econ myself yet! Yikes, we will see how this goes:
The federal budget deficit is undoubtedly one of the most discussed topics today in the general media, and thus in the lives of average Americans too. Suffering the largest economic collapse since the Great Depression, the deficit has to be one of our biggest concerns as a nation. Just this past week, it was announced that in November that the U.S. posted a higher than expected $150 Billion budget gap for the month [1]. That was the 26th straight month that that has happened, the longest ever. For 2011 fiscal year, the CBO predicts a $1.066 trillion deficit and the OMB predicts a $1.416 trillion deficit [1]. Collectively, these are grim numbers that represent relatively little hope. As one of the biggest nation's in the world, it is hard to say we should have one top priority when there is so much going on in our country, but the deficit has to be of high importance because it
With divided government just around the corner when the 112th Congress convenes in January, it is hard to say whether or not the federal government will take legitimate steps to reduce the national deficit. As a ritual hyperpluralist, I have little hope in the government's ability to make legitimate decisions when they seek to please so many interests. Based on the recent tax cut bill which passed in the both houses of Congress and will be now passed on to Obama to approve, the federal government is missing out on nearly $900 billion of tax revenue [2]. The bill is another purported attempt to raise revenue through tax cuts, first popularized in the 1980's during Ronald Reagan's years in office as “supply side” economics [3]. The theory is flawed because when you simply cut taxes, the result is lower revenue and a bigger budget deficit; yet is still used today as a major arguing point today for tax cut proponents [3]. Cutting taxes and cutting spending will do nothing together; both tactics will work against each other and we will be nowhere better than where we left off. Raising revenue and cutting spending is a simple idea that makes obvious sense to cut the deficit (As a student who has not taken Economics, is this idea fundamentally flawed? It makes a lot of sense on paper!). Based on this week's tax cut deal, I see little chance that Congress will make a legitimate attempt to remedy our grim budget deficit, but I remain hopeful.
[1] http://abcnews.go.com/Business/wireStory?id=12367150
[2] http://www.cnn.com/2010/POLITICS/12/17/tax.deal/index.html?iref=allsearch
[3] http://www.slate.com/id/2278282/
America’s budget deficit is known all too well around the world for being obscenely large. Clearly this is a problem that we must do something about before our country can continue to advance in the most crucial areas (aka not defense). This needs to be our top priority right now because waiting has too many negative consequences that stem from having a higher national debt. A higher amount of national debt is detrimental to our already lagging economy because it leads to lower incomes that would otherwise not occur, requires higher government spending on interest payments, increases the likelihood of fiscal crisis due to lack of confidence in the market, and it makes it much harder for the policy makers in the government to respond to any unexpected problems (1). If I was the one making the decisions, I would have to end wars going on in Iraq and Afghanistan. They are too costly for us and if we can leave a few small bases, and I mean extremely small, then we can effectively complete part of our initial mission as well as send our troops home. Being a liberal I feel very compelled to say that we should raise taxes. The problem with this is that the American people are stupid. They want all of these different things from their government but are not willing to pay for it in the least. For once we need a politician that has the guts to actually do whats best for the country, instead of what the people think they want. The numerous benefits of increasing taxes far outweigh the undue anger that some people will feel. (I’m not saying we should increase taxes on the people who make the lowest income, however. Clearly that would be a very bad thing.) Many people in the U.S. feel overtaxed, but they pay one of the lowest percentages of taxes of any first world country (2). A tax on soda seems very practical to me, as it has no nutritional value and is contributing to the obesity epidemic in our fair country (3). However for this to work without unfairly affecting the lower income strata of society we would also need to reduce the costs of healthy drinks, too (3). Capping medicare spending doesn’t sound like a good idea, but I do think we need to raise the social security and medicare ages to 68 or even 70 if we can get it there (2). Given the amount of gridlock and unbalanced compromise that has been occurring in Congress, I would say that no positive changes will be made anytime soon. Decreasing taxes just does the opposite of what we need. Congress needs to get their act together and talk to some economists before we are even worse off than we were before.
saWhy waiting to fix deficit is bad: http://economix.blogs.nytimes.com/2010/12/10/a-gentle-nudge-about-the-deficit/?scp=4&sq=budget%20deficit&st=cse
Tactics the gov’t should use: higher taxes: http://economix.blogs.nytimes.com/2010/11/18/why-i-would-raise-taxes/
Taxing soda: http://economix.blogs.nytimes.com/2010/11/16/taxing-soda-to-close-the-deficit/
The Yearly federal deficit amounts to more than $1.2 trillion.(1) I feel getting out of the deficit is important, but that can’t happen until the economy is better . I don‘t think Congress is going to try to fix it until the economy is better because that is the top concern of the American people. In times of trouble like theses I like to look to Ronald Wilson Reagan. So I’m just going to write about how wonderful Reagan was, may he rest in peace. Ok so Reaganomics or more boringly known as trickle down economy. It we cut taxes for the wealthy the benefits will trickle down to the rest . This sounds a little crazy, but it worked for Regan. The unemployment rate at the end of Reagan’s presidency was at about 5.1% at the beginning of his presidency it was about 10.8% right now it’s about 9.5%. (2) Also Regan single handily ended the Cold war because he is just that amazing. So obviously Congress needs to start asking themselves WWRD?
(1) http://www.examiner.com/political-buzz-in-national/polls-on tax-cut-deal-shows-americans-really-do-not-care-about the-deficit
(2) http://jobsearchtech.about.com/library/weekly/aa032700d.htm
The government needs to take the deficit very seriously. With such a high deficit that is growing, there is very little hope of getting out of debt without some changes. The projected deficit for the 2011 fiscal year is $1.15 trillion dollars(1). $794 billion of this is due to war spending, the Bush era tax cuts, and the recession(1). While in this recession I think that we need to act on getting the unemployment rates down. The unemployment rate is at about 11.9%(4). This is a huge problem as more than 1/10 of the American population isn't paying taxes and probably getting unemployment benefits. This should be our priority right now. Once we get people back to work then we can start working on fixing the budget.
There are many things that the government can do to help curve the increasing deficit. The government makes many payment errors in Medicare, if they cut that in half then that would be $44 billion off the deficit(1). Another could be to try and close the trade gap with China. Our exports to China are around $9.5 billion annually and our imports from China are around $35.12 billion annually(2). This is too big of a gap. If we could buy less from China and try to send more to China then the deficit would decrease. There would be no easy solution for this but it is possible.
I think that the government is very worried about the deficit. The deficit for the first three months of the 2011 fiscal year topped over $370 billion(3). If that isn't a sign to them then I don't know what else we can do other than pray or move to a different country.
(1)http://www.dailyfinance.com/story/getting-to-zero-how-congress-could-balance-the-federal-budget/19801669/
(2)http://online.wsj.com/article/SB10001424052748703583404576079600579354700.html?mod=googlenews_wsj
(3)http://online.wsj.com/article/SB10001424052748704803604576078150996000780.html?mod=googlenews_wsj
(4)http://www2.mcdowellnews.com/news/2011/jan/18/mcdowell-reports-119-percent-jobless-rate-november-ar-705008/
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