http://online.wsj.com/article/SB10000872396390443749204578052790015338944.html?mod=WSJ_economy_LeftTopHighlights
This article highlights some of the main components of the deficit problem and puts the $1 trillion in perspective to years past. And with regards to the nation's debt policy, it's reported that the government will hit the debt ceiling sometime in December. Because the government's revenue slowed during the economic recession, which presidential policy makes more sense with regards to taxation? With regards to benefits? Is economic recovery more important than social benefits? Thoughts on historic economic recovery and fiscal policy?
Economists say the sluggish economy has had a direct impact on the deficit, both constraining tax revenue and fueling government spending in safety-net programs such as Medicaid, food stamps, and unemployment insurance. The extension of Bush-era tax cuts, a temporary two-year payroll tax break, and a number of tax breaks for businesses also have kept revenue levels low.
"The large deficits of recent years are due to "a combination of spending and tax policy, the recession and its effect on revenues, and inaction by policy makers to proactively address the problem," said Phil Swagel, an economics professor at the University of Maryland, who was a senior official in the Bush administration's Treasury Department."
Looking at the chart in that article, one can really see how badly the recession of 08 hit our economy as a nation. In the years that followed, Obama enacted a slow process of rehabilitation through government spending, and stimulus-esque packages that were meant to stimulate long-term growth. It appears at though this could be working, as slow growth is present--but many argue the numbers are so insignificant they might as well be stagnant. I don't agree with his 'promise to reduce the defecit' in the face of so much adversity. I feel that was an overly confident proposition, that he should have realized was near-impossible to achieve without drastically different policy implementation. Another half of his 'promise' depends on American consumerism and investment, two variables unrelated to him--and thus impossible to make a promise on behalf of. I think that in the long run, the debt ceiling will be the next great issue facing America, coupled with the Fiscal cliff looming in the months to come. Austerity measures are bound to come, and the fed will eventually be forced to raise interest rates nation-wide. The fact of the matter is that, Americans are not spending and investing as they should given this climate of government lubricated markets. They can only wait so long before they will take the opposite approach, with raising revenue and savings through cuts and austerity instruments.
ReplyDeleteIn a recent statement by the Romney/Ryan plan, they still neglect to release the details of their tax plan. So much of their 'revenue neutral' planning to lower taxes nationwide depends on the details of this agenda. In his first national newspaper interview since the vice presidential debate, Paul Ryan told The Wall Street Journal that it doesn’t make sense for the Romney campaign to fill in the details of its tax plan before Election Day. “We shouldn’t be negotiating the details of tax reform in the middle of a campaign,” Mr. Ryan said. “You don’t go to Congress and say, ‘Take it or leave it; here’s my plan — pass it.’” Should Mr. Romney win the presidency, Mr. Ryan will be his liaison to Congress on fiscal matters. In essence...this means that they have no formal plan. They have ideologies to be negotiated and argued through Congress at a later date. This seems like a hell of a plan to place the weight of your proposed budget policy on. 'Later discussions with Congress' are not something we can depend on the save the American economy.
The positives of this article is the reminder that our fiscal deficit this year is actually lower than the last three years. However, with that said, the deficit as a whole is still much too high and something needs to be done about our outrageous debt that we are accumulating. I don't find it troublesome that we are about to reach the debt ceiling in December, because as we have seen in the past Congress will simply raise that number. However, drastic measures need to be taken and hopefully with a new election coming in November we will begin to see some changes.
ReplyDeleteHistorically, in the last few years we have seen the highest deficit since the World War II era. Obviously this is a bad thing and what makes it even worse is that we need to pay up soon. The government is going to hit the deficit ceiling this December. As stated by the article, “This year Treasury officials are expected to implement emergency measures to buy the government more time to avoid missing payments until Congress can reach an agreement to raise the ceiling” (Paletta and Sparshott, 2012). Bottom line, the deficit is too high and we need to start paying back out nation’s debt. But what I am most interested in know is the consequences of a large deficit. A high deficit usually means slower economic recovery, but it seems to me that the economy is recovering slowly but surely. I would like to hear more about the affects of a large deficit on things such as inflation, unemployment, and even the consequences of not paying back in time. It seems that whenever America runs out of money, we borrow for foreign nations. What is the downfall to borrowing? How high of an interest rate are we paying to borrow?
ReplyDeleteAs far as the presidential race is concerned, it would seem if people were voting strictly on the economic issues, Romney's plan of reducing spending would look the best at face value. However, his promise to reduce spending, also cut taxes, but still bring in the same amount of tax revenue has some voters skeptical. Overall though, I do believe that spending needs to be cut. Even after doing that budget balancing exercise last week and seeing how difficult it truly is, cutting spending is a necessary evil and will have to be done if we want to get our debt into a managable number.
ReplyDeleteThis article in combination with the discussion last week have really helped put into perspective the way that the debt has accumulated over the past 12 or so years. Before this point the debt seemed like an ominous nebula of impending financial ruin. Although this problem is clearly not a positive for the united states, it simply requires some tough decision making, of which would require full congressional attention and cooperation. The article provides us with this line:
ReplyDelete"a combination of spending and tax policy, the recession and its effect on revenues, and inaction by policy makers to proactively address the problem" I think it is not the first or the second that remain the problem, with common logic and some rather rudimentary math one can solve the debt problem. Instead political maneuvering in the guise of political ideology has pushed any solution to a screeching halt. How do we grease these gears, then becomes the next question?
The national debt is clearly out of hand. We have let it go on for too long and it is not going to get smaller by itself. Unfortunately, this will probably come at the hands of higher tax rates mainly for all citizens to cut it down seeing how we are going to hit the debt ceiling in a couple months, which will most likely be raised again anyway. As far as the election, it is hard to vote for Romney without his detailed tax plan that is supposed to cut taxes and decrease the national debt. With the exercise we did last week, there will be government spending that will need to be cut but it almost seems inevitable at this point that rates will have to go up nation wide to help tackle this problem. We can't hold this kind of debt forever. I don't know if there can be an equal share of cutting spending, raising taxes and paying off this debt and keep the economy rising as it slowly is now but sooner or later this needs to be taken care of or at least progressed, and the longer we wait the worse it will get and the economy could easily slip back down again.
ReplyDeleteSlow recovery is better than no recovery. As much as I would like to be outraged and see the debt disappear next year, that just isn't going to happen. Clearly there is no magic economic formula that is going to get us out of this mess anytime soon. So rather than do anything to drastic, let's hold off on the pitchforks and let a plan take shape. A plan needs to be in place to accumulate steady consistent results, even if we don't see a huge drop in the debt, we need to see something. A fundamental change that will gradually shift us back to the black is the only senseable course of action.
ReplyDeleteThe situation is getting worse everyday and quick action is needed because if they don't act quick the debt is only going to grow. There are rooms for improvement to cut down the deficit however we cannot afford to lose to much time so some harsh action can be expected. We are soon going to see increase in the tax rate, this might not be easy for the public but there is no easy way out to escape this crisis.
ReplyDeleteBased on the fact that Romney's tax proposal is completely unfeasible, I have far more faith in Obama's ability to help the economy. I believe that Romney, like Bush, is pretending to champion small government during the campaign, as a counterpoint to Democrats, but once elected, will act without accountability to his campaign promises, which numerous economists have already said cannot be fulfilled. I see the choice as between the guy who has been working really hard for four years against a congress that was against him even when he had a supermajority and who has laid out a clear and rational tax plan, vs the guy who worked as governor five years ago, has done nothing since except campaign, cannot come up with a rational, realistic budget, and despite this will still build the navy billions of dollars of new ships that it does not even want.
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