America's Deficit: Where the Government can Save

December 19, 2010
By Anonymous


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. 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. 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.
Contributing Factors to the Deficit

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. The second proposed solution is to stop spending more and more because of the current recession. This resolve aims to eliminate irresponsible federal spending by repealing stimulus funds that have done nothing in the creation of jobs, and that any money being spent to assist the unemployed, should be offset by spending cuts in other areas of the budge, and lastly, that ObamaCare should be repealed because of its severely harmful effects on the deficit. The Obama Administration alone has added billions in new federal spending and though their aim was to improve the economy, their recessionary spending has done nothing but add to the deficit. In addition to cutting administration spending and enacting spending caps, programs like Medicare, Medicaid, and Social Security, which are responsible for a large dent in the deficit, need to be reformed. While still offering all of these programs, the government needs to find new ways to offer them without putting the country into even more debt on an annual basis; controlling entitlement programs would have a positive effect on the national deficit. Lastly, putting a ban on corporate welfare would also move America along in the path to spending reformation. Before financial bailouts were imposed, the government spent more money on corporate welfare at $90 billion than on homeland security at $70 billion. In order to discontinue taxing the American people, Congress must work on reforming America’s larger corporate welfare programs like the farm subsidies where money is given to large and profitable businesses rather than smaller farm families that are struggling. If money is better distributed, the government can still pay for those things that remain necessary like helping those who are suffering, while continuing to save money each year and slowly cutback on the deficit. In the upcoming 2012 fiscal year, there are many areas of spending that have the possibility for cuts to take place. Within this reform, Congress should focus their efforts on getting the federal government to allow state and local governments to address areas like transportation, justice, and job training. In addition, Congress should simplify duplicative programs; because there is an overwhelming amount of duplicative programs that are constantly being piled on preexisting ones, it raises administrative costs and in the end confuses people. Congress also needs to take into account that many of the current government functions could be sustained easier if it was in the hands of the private sector. In the area of government reform alone, $44,000 could be saved if payment errors were reduced by 2012; this elimination in errors would take place in federal programs like Medicare. In terms of health care, there are many areas for saving. If ObamaCare was repealed in 2012, $5,000 would be saved and it would gross even more savings in years following. So, in order to reduce the deficit, Congress’ aim should be to work towards reducing spending in certain areas, and decreasing debt growth from reaching higher than the GDP in a timely manner.

The national deficit should certainly be a top priority for Congress. It is the job of Congress to manage the budget and do all they can to reduce the national debt and act quickly on the reformation of the economy. Congress should first identify where the large areas of spending stem from and from there, distinguish areas where spending cuts are possible. While entitlement programs are inevitable, the reformation of programs like Medicare, Medicaid, and Social Security is essential to being able to safely continue to provide these government organizations. Congress need not only to look at the overarching national debt, but take each fiscal year and reevaluate what they can do to reduce annual spending that will translate into a decreased deficit and more money saved for the government. Given how the last two administrations have spent money, Congress needs to find other areas of spending to cut to offset the immense spending that came from the Bush-era tax cuts, and that is currently resulting from President Obama’s recessionary spending. The American people are relying on Congress to make good decisions on the current deficit and do their best to not overlook the glaring statistics, but do something to dig the nation out of the large deficit and offer reasonable and attainable spending cuts.

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This article has 1 comment.

on Dec. 26 2010 at 3:38 am
Treefiddy BRONZE, Tarzana, California
1 article 0 photos 158 comments

Although I agree with many of the points you made, in conjunction with  the need for massive spending cuts, I would argue that in order to deal with not only reviving a failing economy, across the board tax-cuts should be implemented to lower the federal deficit. Every time that federal taxes have been lowered, including the capital gains tax, federal revenue has increased. When taxes are increased, people's incentives change and they are more reluctant to spend their money on things such as capital equipment. People are more incentivised to invest their money in municipal bonds, which is generally tax-exempt. Accord to the laffer curve, there is a particular inverse proportion between the level of taxation and revenue at a certain level of taxation. For example, when you tax at a rate of 0 percent income, you collect nothing in taxes; when you tax at 100 percent income, you also get collect nothing. The class warfare rhetoric that the President was pushing before this "bipartisan deal", where unemployment benefits were extended for 13 months so that tax rates would not increase January 1, where he said that we cannot afford to keep tax rates the same for those who earn a wage of $250,000 or more, is simply not true because the amount of money collected by the IRS has increased dramatically since the 2001 and 2003 tax rate cuts.

Raising taxes, especially in this economy, would r.etard economic growth, lower availability of capital formation, lower wages, destroy jobs, and would deincentivise productivity and economic growth.

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