Shawn Tully writes about how America’s national budget has jumped from a huge surplus in 1998-2001, to now an enormous deficit. Even though there was an economic slow down during the beginning of this century. There is no excuse for the $375 billion deficit last year and additional $521 billion projected this year. The rationale for this spiraling downward trend is poor monetary spending and budgeting by George W. Bush and his White house staff. What one says and actually does are two different things.This has become a major focus for this election year since Americans, as well as foreign governments and investors whom fund the deficit, are now aware of this escalating problem which may hurt the U. S.
economic recovery. Why do deficits matter? First, they increase the national debt causing government spending to grow because of the growing interest expense. Second, they leave us to the leniency of foreign governments and investors to finance that debt. Lastly, they show how the government cannot control their own spending.Right now the foreign investors have faith that our fiscal management will turn things around, however if they lose that faith then financing future deficits will be almost impossible. The prior presidencies of George Bush senior and Bill Clinton helped to create those deficit surpluses in the late 90’s. A Budget Enforcement Act was passed during this time which tightened discretionary spending by forcing budget cuts in one entitlement in order to increase others. This helped drop government outlays to 4% of the GDP in 1992.
We are in a different situation today. In the wake of 9/11, defense spending has increased because of the war in Iraq.Also, Homeland security, rising health-care costs, and shifting demographics in Social Security have caused the government spending to grow at alarming rates. Steps that were taken by the Bush administration did not help either. The steep tax cuts, increases in federal aid for education. Finally, federal spending outside defense and homeland security has jumped to 7% annually since 2001. That does not make things any easier.
The passing of the new Medicare drug benefit allowed Medicare spending to jump over 10% annually, when without it, Medicare spending was expected to rise by only 6%.These poor spending decisions helped to wipe out the gains of the last decade in only a few short years. I believe the deficit is a big problem and needs special focus.
If the Bush administration would re-implement the Budget Enforcement Act, it would force Congress to make tough choices on their spending habits. Along with cut-throat spending, I agree with Tully in raising the eligibility age for Social Security. This would relieve some of the spending in this entitlement and tie the benefits to a more accurate index.Especially since the consumer price index overstates cost-of-living increases. Finally, tax increases and rolling back recent tax cuts will be needed to help decrease the deficit for this year and years to come. The U.
S. needs to continue its economic recovery, and by fixing only certain parts and leaving others as is will not help in the long run. America must take action towards “restoring fiscal sanity” and I believe these are some of the ways to do it. The deficit is in the spotlight again, and the lights will not dim until the problems are solved.