Budget Deficit Reduction
Budget Deficit Reduction
History has a way of repeating itself and the budget deficit and attempts to reduce it are no exception. The budget deficit is an annual amount that the federal government sets forth based on the amount of tax revenue it receives. When the amount spent goes over the amount received, you have a deficit. The United States government and the economy has gone in cycles when the budget deficit was not existent and there was a surplus and then to where there was an extreme deficit. In this paper we will discuss many scenarios over the years where Congress has taken actions to reduce the deficit and whether it was effective or not. We will compare them to the current scenarios that are in place or being considered to address spending and revenues.
In 1985, the Gramm-Rudman- Hollings Act was passed. This act was to reduce the deficit from $200 billion in 1986 to zero in 1990. The act only made the President and Congress meet the targets of the projected but and did not make them meet the actual budget. It did provide for a decrease for several years partially because of spending cuts and partially due to tax revenue increase from the growth of the economy (Amacher & Pate, 2012).
In 1992, the budget deficit became a huge problem for voters and they were looking for the next president to help with it. That is where President Clinton came in. His administration created a deficit reduction program using tax increases and spending cuts that was made to lessen the deficit by $500 billion over five years. In 1990, the Budget Reinforcement Act of 1990 was used to enforce the Omnibus Budget Reconciliation Act of 1990 and also amend the federal government’s budget control process. This helped to achieve the first surplus for the United States since 1969 and it almost double in 1999 and in 2000 (Amacher & Pate, 2012).
The subsequent years were not as good. There were some very hard times after 9-11 and the country was facing some serious economic downturn. The deficit was increased tremendously due to defense in the Eastern countries and the dot com and housing bubbles. There really could not be efforts made to reduce the budget when the economy was doing so poorly.
In 2011, there was a plan put into place by President Obama’s administration that is supposed to help the United States move toward financial stability. It is set to reduce the budget by $1.2 trillion in the next ten years. It is said to be the greatest deficit reduction program proposed for the Presidential budget since Clinton’s administration. It is said that this budget spurs job creation, invests for the growth of the economic future, and it is moving the United States toward fiscal sustainability (Orszag, 2010).
Recently, the term sequestration rings in many ears. This is where the defense budget gets drastically reduced and is about half of the budget cuts. Republicans believe that other things should be cut more than military whereas the democrats feel that they could offset some of the budget cuts with new revenue by evaluating and eliminating loopholes. The hard part is that because there are limits on how much can be cut from government programs like Social Security and Medicare, the non defense programs will see lesser cuts. The Whitehouse that loans to small businesses would be reduced, there would be less food inspections, it will cause hundreds of thousand mentally ill people without their medication, IRS agents would not be able to help everyone with their tax questions and would not be able to audit. Lastly, over a 1000 federal agents would not be able to go after criminals and protect our borders. The other areas that will be affected are head start programs and National Park Services (Puzzanghera & Simon, 2013).
Although I am a strong proponent of budget cuts, it is a hard pill to swallow that these things that we take for granted as Americans could soon be reduced or gone. But it is somewhat reassuring that there is a plan in place and that there is real concern over the well being of the people of this great country. Times are hard but I don’t think they are nearly as hard as they were for our ancestors. We have so many luxuries and freedoms and although we want these things, they are not a necessity to keep our country running and keep our economy afloat. The government has tried many times to reduce the budget deficit and at times it was successful and other times it was not or there was crises that got in the way. All in all, there are still many things that need to be considered and need to be addressed. This does not lie completely on our President. We should be making changes ourselves to help our country get out of the state it is in.
Amacher, R., & Pate, J. (2012). Principles of macroeconomics. San Diego, CA: Bridgepoint Education, Inc. Retrieved from https://content.ashford.edu/books/AUECO203.13.1/sections/copyright Orszag , P. (2010, Feb 02). [Web log message]. Retrieved from http://www.whitehouse.gov/omb/blog/10/02/02/A-Short-History-of-Deficit-Reduction Puzzanghera, J., & Simon, R. (2013, Feb 11). Budget ax set to fall across wide spectrum - 1st installment would total $85b if deficit reduction plan not ok'd. Tribune Newspaper, p. A14.