Fiscal Administration

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Federal Budget
PUAD 5943 Public Budgeting and Fiscal Administration

The process of composing a federal budget that can be passed by both chambers of congress and signed by the President has proven to be a daunting task for a divided Congress. The frustration is shared by Democrats and Republicans alike and has been fueled by groups of extreme party members unwilling to compromise or find like footed ground. While Congress has so far avoided a federal shutdown with the eventual passage of the House’s Budget proposals, the fiscal debate is far from over as seen by the completion of the Budget Committee’s 2012 proposal that will be voted on in a few days. With the economy still struggling and the unprecedented build up of debt over the past decade, the stability and sustainability of the United States is under question with the fiscal cliff nearing. The budget created by President Obama and his administration has focused on the current state of the economy as a reason for a bipartisanship approach versus his traditional progressive liberalism. “In an effort to reduce the national spending deficit, which has continued to grow exponentially over the years, spending cuts of $38.4 billion in education and various other programs were made by the President” (Chantrill, 2011).   His proposal has received criticism on both sides of the table, as Progressives continue to argue that the cuts are too much and unnecessary if the tax rate is raised. Conservatives are enraged that there are not more significant cuts, and so the continuing debate argues the means in which the Federal Government should diffuse the deficit gap. The Progressive Liberals tend to argue in favor of Keynesian economics that promote government management to combat unemployment, inflation, and increase GDP growth. They believe that the above cuts are made possible through stimulus spending that in theory favors the economic disadvantaged through redistribution of wealth.  Any deal, all agree, would have to include revenue increases as well as budget cuts. A key question is whether any new revenue includes changes in tax rates – specifically, an end to the Bush-era tax cuts for those earning more than $250,000, which is what President Obama has been pushing and Rep. Boehner says “no” to. “Currently the Liberals are hoping to raise the income tax rates from 25% to 35% for the people who make $200,000 or more each year (Silverleib, 2011). This 10% tax increase would be the one of the highest ever-imposed in history. Currently the 25% rate is being protected by the tax cuts implemented by George W. Bush as a means of stimulating the economy through common conservative tactics known as supply side economics. “This belief suggests the most efficient way to stimulate growth is not through excessive stimulus spending but rather GDP growth as a means of natural economic stimulus. This is most commonly seen through low tax rates to the wealthy, which allow businesses and individuals to bolster the economy through investments” (Ryan, 2011). “By crippling the upper class’s ability to consume and invest more, they believe long-term economic success cannot be sustained” (Goozner, 2011). They believe this is a way to eventually diminish the deficit over several decades. It is believed that by counteracting the seemingly low tax revenue with significant spending cuts across the board, and especially in regards to programs that are considered discretionary or inefficient, this can be done. Conservative officials blame the growing deficit on the irresponsible spending habits of Liberals, and feel that the country must now over compensate by essentially cutting expenditures to funds wherever possible. For years politicians have dreaded the retirement of the Baby Boomer generation, due to their overwhelming numbers and the financial implications of these numbers on the struggling economy. “Social...
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