Balanced Budget Balanced Budget Thomas Jefferson stated, I place economy among the first and most important virtues, and public debt as the greatest of dangers. To preserve our independence, we must not let our rulers load us with perpetual debt (Grinsburg 1). This quote illustrates the importance of maintaining a balanced budget; therefore, it is necessary to stand firmly resolved that the government should balance its budget. Three main arguments uphold this premise. They are as follows: 1. It is feasible for the government to balance the budget, 2.
A budget deficit harms the United States through creating a trade deficit and increasing the national debt, 3. A balanced budget would benefit the United States by providing extra funds for social programs, tax cuts, and reducing the national debt. Argument 1: It is feasible for the government to balance its budget On of January 7, 1998, the U.S. Congressional Budget Office released a budget forecast that shows the federal budget to be in effective balance, with a projected deficit of just $5 billion this yeara trivial percentage of an estimated $8.5 trillion gross domestic product (Bartlett 8). The government was able to balance the budget without causing negative complications. This balance came absent of any significant tax increases and/or government cuts in spending. Because the United State’s economy has been relatively productive in the past few years, the government was able to balance the budget through an increase in tax revenues. During this time the government was actually able to increase its spending somewhat, while the American people were free from additional tax burdens. In fact, according to the U.S.
Treasury Department, federal revenues are up 10.5% over the same period a year earlier, while spending is up only 3.8% (Bartlett 6). Essentially, this shows that it is not only possible for the government to balance its budget, but it can also be done without negative consequences. Maintaining a budget deficit, on the other hand, drastically hurts the stability of the U.S. economy. Argument 2: A budget deficit harms the United States through creating a trade deficit and increasing the national debt Almost everyday on the news one hears something about the Federal deficit and the U.S.
budget problems. Currently, the Federal deficit is over five trillion dollars, and that divided out among the U.S. population equals over nineteen thousand dollars per person. This enormous debt couldn’t have been created overnight. The government’s failure to balance the budget resulted in both the large trade deficit and large national debt. First, the government needs to focus on the trade deficit.
Lowering the budget deficit will help the American public with national savings which, in the long run, will rescue the trade deficit. The ballooning federal deficit had cut national savings far below the nations investment needs. As a result, the U.S. had to import capital from overseas, which inevitably resulted in a trade deficit (Koretz 1). The main point of all this is that private savings is down, and needs to be brought back up. Thus, while the public sector’s saving performance has improved mightily in recent years, America’s household savings rate has plummeted to its lowest level in 39 yearsleaving the U.S. still highly dependent on foreign capital (Koretz 1).
Another key point to this issue is high foreign debt. By 1997, the U.S.’s net foreign debt was more than 1 trillion and was increasing at an annual rate of 15 to 20 percent, with Japan owning almost $300 billion and China more than $50 billion in U.S. treasury bonds (Huntington 28). Eliminating this foreign debt would be another good step in the right direction for the U.S. government. The second obstacle is that the national debt is troublesome.
The national debt and interest payments mean higher taxes. The interest on this debt is growing everyday, and something needs to be done so taxes don’t keep getting higher to pay for it. Today, the government must spend 40 cents of every personal income tax dollar to pay interest on the national debt (Ginsburgh 1). If 40 cents doesn’t blow your mind, then maybe the billion dollar figures will. Gross interest on the debt will continue to rise substantially over the next 5 years from $360 billion in 1997, to $412 billion by 2002, and by 2007 just the interest on the debt is projected to be $483 billionThis $493 billion is just $50 billion shy of our entire discretionary budget for the current fiscal year (Hatch S1152-1187).
These numbers are unimaginable for most U.S. families. You may wonder how does something like this even begin to happen. Let’s break it down even more. The U.S.
national debt stands at over $5 trillion dollars, and that translates into over $19,000 for every man, every woman, and every child in America. The debt of an average family is more than $72,000. That is more than the average family income in America. You think its bad on family, what about the young minds of American bringing us into the 21st century? For many young adults who are taking advantage of student loans to obtain a better education, the national debt can ring up $2,200 in additional costs on that loan (Hutchinson S985-988). The elected officials in office need to focus harder on these topics and quit shoving them out the back door of the capital.
Even worse, the demographics of the U.S. are changing drastically. People are living longer, putting an even larger burden on the entitlements. Along with this, the number of working taxpayers will decline when the ‘baby boomers’ reach retirement. This will mean fewer revenues for the government, making the situation worse. Something has to be done to fix the budget problem, or future generations will have the problem that they did not create. Argument 3: A balanced budget would benefit the United States by providing extra funds for social programs, tax cuts, and reducing the national debt A balanced budget is essential for the future well being of our country.
Currently, individuals within our country are realizing that without some sort of economic action social programs like Social Security will have to be shut down, taxes will have to be raised to outrageous amounts, and the national debt, including interest payments, will suck our budget dry. The most viable option to preventing these problems is balancing the budget. Social Security and other social programs seem to be increasingly at risk with the aging population of the United States. Currently Social Security and Medicare combined make up 32.5% of the Total Federal Outlays (Congressional Research Service 1). This already large number is expected to increase when baby boomers seek retirement. Without a balanced budget, the baby boomers could cause serious problems.
Estimates show that to provide for the baby boomers through these programs, the government would have to raise [taxes] by about 50% to raise enough money (Krugman 94). Clearly, this is an alternative that the government does not want to take, and, thanks to a balanced budget, it won’t have too. Our recent balanced budget has even lead to a surplus with provides an amount of extra funds that can be used to help programs such as these. Even without a budget surplus, a regular balance would have the same effect because the government will reduce its national debt, which means fewer interest payments and therefore means more money to spend on these programs without having to tax the American people more. The national debt in itself is a large problem, as seen in the previous argument.
In addition to harming our society by placing larger tax burdens on Americans, the interest payments on the national debt take money and resources away from other areas. Many argue that the best way to safeguard Social Security is to apply all of the surplus to paying down the national debt. Such an approach would shrivel the government’s interest costswhich are currently one seventh of all spendingand potentially leave enough money in the overall budget to cover the gap between Social Security costs and payroll tax receipts for decades, according to administration projections (Brownstein 1). When the government has run a debt so large that it spends an enormous amount of money on interest alone, it is wise policy to want to eliminate that financial burden and allocate the money to more beneficial projects. Because the government can balance its budget with no negative consequences, it should seek to do it.
After all, the benefits are a necessity for the economic survival of our country in the future. Balancing the budget also prevents a need for the government to tax Americans more. With a budget deficit, the government may have to seek more money from its people in order to fund its budget; however, with a balanced budget, this is not necessary. First of all, taxes are already very high on Americans, and therefore, any policy that might lower taxes would be beneficial. According to a Tax Foundation study, State and local taxes claimed an astonishing 38.2 percent of the income of a median two-income family making $55,000up from 37.3% in 1996Federal taxed under President Clinton consumed 20 percent of America’s entire gross domestic product in 1997The average American family today spends more on taxes than it does on food, clothing, and housing combined (Grams S882-884). With taxes already this high, the government ought to try to lower the tax burden on the public.
By creating a balanced budget, the government can work toward reducing the national debt which will lower the amount of money paid on interest, which will lower the amount of money the government needs to collect through taxes. In conclusion, the budget deficit causes harmful problems, such as an additional trade deficit and a large national debt, that need to be reduced. In addition, a balanced budget would help failing social programs and alleviate the tax burden place on U.S. citizens but creating a surplus and lowering the national debt. It is also very feasible for the government to take this course of action because, with the increased tax revenues, the government can balance its budget without raising taxes and/or cut government spending. Bibliography Works Cited Bartlett,Bruce.
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