Federal Debt and Deficit: the Solutions

Topics: United States public debt, Government debt, Tax Pages: 8 (2603 words) Published: December 6, 2011
The historical federal spending of the government has already done significant damage to America; spending habits have increased the federal budget deficit at alarming rates adding $2.7 trillion to the national debt in two years, $1.4 trillion in the 2009 fiscal year and $1.3 trillion in 2010. (Montgomery)   These deficits are largely caused by increases in spending rates. The current Obama Administration has used the recession in their favor to expand both the government and spending.

America has not seen deficits of this nature since World War II with spending levels reaching 25% of the GDP and deficits reaching 10% of the GDP. And, even when this recession comes to an end, estimates show that annual deficits will continue to surpass the $1 trillion mark, and this could result in a myriad of adverse effects ranging from high interest rates to tax increases. Currently, federal spending per household, which has increased from $25,000 to $31,000 since 2008, is estimated to reach $36,000 by 2020 under the Obama Administration, and if spending increases at this rate, by default, so too will taxes. ("US Census Bureau") Even with his proposed tax increases estimated to allocate $3 trillion in taxes, President Obama’s budget would double the current national debt by 2020 to more than $20 trillion or $138,000 per household. Clearly, government spending is a significant contributing factor to the deficit and to the national debt. Entitlement programs like Social Security, Medicare, and Medicaid will continue to increase the deficit, but in order to continue to promote economic growth; Congress must put spending cuts into action.Policymakers shouldn't think of spending cuts as a necessary evil needed to reduce debt. Rather, the government's fiscal mess is an opportunity to make reforms that would spur growth and expand individual freedom. The plan below includes a menu of spending cut options for Congress, and further reforms are described at www.DownsizingGovernment.org.  

Though there have been many contributing factors to the current deficit, research says that the Bush Administration policies contribute to 40% of the 2009 and 2010 fiscal year damage. The Bush tax cuts took away an estimated of $231 billion in government revenue in 2009, and because of the federal debt added by President Bush, the government paid an additional $218 billion in interest in 2009 as well; researches claim that without the Bush tax cuts, the deficit would have been 4.7% of the GDP rather than 11.2% in 2009 and only 3.2% instead of 9.6% in 2010. In addition to his tax cuts, President Bush’s fiscal irresponsibility has largely contributed to the current economic crisis. President Obama, too, has contributed to the federal deficit. While only making a 16% dent in the 2009 and 2010 fiscal year damage, his American Recovery and Reinvestment Act, that was supposed to improve the economy, has turned out to be the largest factor in public spending during his time in office. Even so, President Bush has contributed approximately $2386 billion while President Obama has only done $722 billion in damage. Regardless of who’s to blame, researchers agree that the deficit is an issue that needs to be dealt with through cuts in spending and rapid reform.

Solutions for Decreased Spending
In an attempt to decrease spending and discontinue contributing to the deficit, there have been some proposed solutions for Congress to put into action. The first is the enactment of spending caps. Since Congress does not have any spending restrictions, discretionary spending has doubled since spending caps expired in 2002 and entitlement spending has continued to increase exponentially each year. Because of this, Congress needs to implement spending caps to help set priorities and expel unnecessary spending on a yearly basis; Congress should enact strong spending caps on government spending so as to keep the budget in order and make sure that spending is not taken lightly....

Cited: In particular, see Budget of the U.S. Government, Fiscal Year 2012, Analytical Perspectives (Washington: Government Printing Office, February 2011), Table 33-1.
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