Despite, these dismal job predictions, economists predict a 2 percent increase in GDP this year, followed by a 1.1% increase next year. But as we learned in econ, GDP is not a complete indicator of a country's health.
The Bush tax cuts, which are due to expire at the end of this year, would add 5.4 trillion more dollars to the deficit if continued for ten more years. Another topic is Medicare. Paying for Medicare is part of the federal government's mandatory budget, and many from both parties are urging Congress to prevent cuts that would drive up health care prices even further.
Both parties have been spinning this news to their advantages. Republicans use the bleak projections for this year and next year as proof that president Obama's policies have failed. Democrats have been citing these projections to say that increasing revenue, presumably by taxing wealthy Americans, would strengthen the economy, which they believe in the long run is the best way to fix the economy.
So what do you guys think of the news? Is the small decrease in the deficit a cause for at least some celebration, or do all of the other projections make the next few years seem grim? How should and how can Congress try to solve this problem? What effects will this information have on the ongoing 2012 election campaign?
2 comments:
Since the national deficit is already hovering around the $15 trillion mark, it seems insignificant that we only managed to cut $200 billion. However, I think that it is a sign that the government no longer feels the need to spend as much on social welfare programs and the like. This coupled with the projected increase in GDP leaves me with hopes for the future.
In addition this "bleak" prediction of GDP growth is actually better in my opinion than something that is in the double digits. This is because if you have slow, consistent growth, then the economy is more stable and less likely to fluctuate. Because when there are huge spikes, this causes high amounts of instability as seen with the 2007-2008 housing market.
Sure, the deficit went down by a small percentage. But still, the last three years were literally the three worst deficit years in US history. In 2011, the deficit grew by almost three billion dollars per day. That's a lot of money. This number is far more significant than the 2% rise in GDP this year. Moreover, after we got downgraded to AA+ by S&P in the summer, our interest rate for borrowing money from foreign countries and international institutions has risen significantly. So I guess it's good news that the budget deficit is getting smaller, albeit slowly, but if we don't do anything to actually decrease the federal deficit, we'd have to pretty much pay a unnecessarily large sum of taxpayers' money on interest.
To increase revenue, more taxes on the richest percentile of the country should obviously be discussed further. Also, though it may be blatantly obvious, the government should watch the awfully large amount of unnecessary spending that seems to happen more often than anyone would care to admit. For example, two years ago, the government spent $18 million dollars to redesign the stimulus website, recovery.gov. Eighteen million dollars. They also sent $1.5 million to Indonesia in attempts to discourage air pollution in Jakarta. $10 million to recreate a Sesame Street in Pakistan. $15 million to build the now-abandoned Bridge to Nowhere in Alaska. Sure, in the grand scheme of things, a few million here or there may not seem like much. But all these things add up and becomes quite significant.
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