Summary: The federal government's annual budget deficit has been growing steadily in recent years and, according to new projections released by the non-partisan Congressional Budget Office on Monday, is expected to top 1 trillion dollars by 2020. The national debt, which has already exceeded 21 trillion dollars is expected to top 33 trillion in 2028, representing nearly 96% of the GDP (as we learned in class on Monday a health debt to GDP ratio is considered to be only 77%). Republicans have claimed that the economic growth generated by the tax cuts, would more than compensate for the losses in government revenue, but the data does not seem to be backing up that claim. There is a lot of concern that the budget deficit will not be addressed until it is too late.
Analysis: Like we studied in Econ earlier this year, a large federal budget deficit leads to a stagnate economy, as private borrowers are pushed out of the borrowing market by the federal government. This leads to fewer investments on the part of business owners and corporations because they are unable to secure the capital they need to expand. Expansion of business correlates directly with a growth in GDP, which we saw earlier is very closely related to a country's standard of living. Anything that slows the growth of GDP also hurts standard of living in the long run. Trump's tax cuts without a massive decrease in government spending are not good for the country.
Questions:
1. What do you guys think needs to be done to decrease the budget deficit?
2. Why do you think the Republicans, who have traditionally advocated strongly against high government spending and budget deficits, are now the ones increasing the annual budget deficit so much?
3. Do you think it is better to decrease government spending or increase taxes in order to help the budget?
4 comments:
First of all, we need a balanced budget Constitutional amendment. This amendment is already in place in 49 out of 50 states. An amendment such as this states that the expenditures of the government shall not exceed it's revenues-something that seems so fair and reasonable, one wonders why they haven't done it before. A balanced budget amendment would eliminate the federal deficit, and would by extension eliminate any new national debt. This would enable the federal government to work off the national debt, and force government to be more responsible with spending and taxation.
In order to help the budget itself, we'd need to gut everything-starting with a hefty 30-40% reduction in defense spending (with the majority of troops stationed overseas being brought home and many outdated military pieces sold to our allies.) Several departments would be scrapped, with assets being either privatized, devolved to the states, or dismantled entirely. Finally, I'd see a gradual elimination of entitlements spending, reverting all entitlements to means-tested social welfare. It's absurd that the wealthy of this country would care for or even need government-provided social services that are truly meant for the less well-off. It may sound antithetical to my libertarian beliefs, but putting all social services on means-testing truly emphasizes the libertarian values of self-reliance.
In addition, I would strongly advocate for the elimination of the IRS and a replacement of all pre-existing tax codes with a proportional and fair flat tax. Foreign countries such as Russia, Bolivia, and Saudi Arabia have already successfully implemented some sort of flat tax. In the United States, Senator Rand Paul recently introduced a tax plan that would eliminate most preferences and replacing existing income taxes with a 14.5 percent flat tax for individuals, businesses, and investments. 14.5 percent might seem harsh to those making minimum wage, but for the greater society (which the left seems to hold in higher regard over the individual) a flat tax actual has a net societal and fiscal benefit. For example, it's much harder to commit tax evasion or tax fraud, and it's much easier to file taxes come April. Millions of dollars spent on bureaucratic administrative costs can now be reverted to causes that actually matter, such as job creation or national defense.
The OP asked if it was preferable to decrease government spending or decrease taxes in order to help the budget. I say 'why not both?'
To respond to Granger's comment I have a couple of notes. The first would be that I intended to make the 3rd question regarding the relative merits of decreasing government spending or INCREASING taxes to help the budget (this is now corrected on the original post), though I understand Granger's position would be to decrease both taxes and government spending. I agree with Granger that there should definitely be a significant decrease in "defense" spending. There is no reason our military needs to be as big as it is. I would qualify that by saying that this is a change that should be taken care of slowly, I fear that withdrawing too quickly from our overseas bases around the world would create a power vacuum that would create a lot of chaos in the world. Any drastic change should be done slowly. This includes any change to the tax plan, which is where I mainly disagree with Granger. A flat tax would hurt low income people. While a progressive tax program is a little more labor intensive, the benefits outweigh that investment of time. I also am conflicted on the issue of a constitutional mandating a balanced federal budget. On the one hand it is cleat the United State's budget deficit is much higher than it needs to be, but I also believe the a little bit of borrowing by the federal government is not a terrible thing. I think that the goal should be to be less in debt, but not to eliminate federal borrowing altogether. On a more practical level, I do not think that the government would be able to create a balanced budget at all. If not being able to create a balanced budget leads to essentially a constitutionally mandated government shutdown, I don't think the government would be open very much.
I think that the expansion of our armed forces recently is the biggest factor that raised the deficit. Even though the party is labeled as Republican, I think that this current administration is so unique with Trump as it's head. Once a democrat, now a Republican, he is everywhere. I think it is more beneficial if we lowered government spending.
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