The U.S. Federal budget deficit should be a major concern for every American citizen. The ever increasing budget deficit was a major factor leading to the Standards & Poor’s downgrading of the Nation’s credit rating. The issues surrounding the downgrading of the U.S. government’s credit rating were detailed in a report published by the Washington Post dated August 5, 2011.
Standards & Poor’s announced Friday night that it has downgraded the U.S. credit rating for the first time, dealing a symbolic blow to the world’s economic superpower in what was a sharply worded critique of the American political system.
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Lowering the nation’s rating to one notch below AAA, the credit rating company said “political brinkmanship” in the debate over the debt had made the U.S. government’s ability to manage its finances “less stable, less effective and less predictable.” It said the bipartisan agreement reached this week to find at least $2.1 trillion in budget savings “fell short” of what was necessary to tame the nation’s debt over time and predicted that leaders would not be likely to achieve more savings in the future.
According to figures provided by the Office of Management and Budget, Federal revenues for 2011 were approximately 2.3 trillion dollars. Federal outlays for the same period were approximately 3.6 trillion dollars, leaving a deficit of 1.3 trillion dollars. All of the years of deficit spending combined have left the nation with a national debt of over 15 trillion dollars. Restoring a proper balance between expenditures and revenues will require the nation to make some difficult choices in the coming years.
Income Taxes – Who is Paying the Bill?
Many people would like to see personal income taxes increased for the wealthiest Americans. The facts on this issue are clear; the wealthiest Americans are already paying most of the taxes the Federal government receives each year. In a report published by CCN Money dated April 16, 2009, Jeanne Sahadi reported that, “The top fifth of households paid 69% of all federal taxes. The top 1% paid 28%.”
At the same time the wealthiest taxpayers are paying the highest percentage of federal tax revenues, the IRS returned billions of dollars in to taxpayers through the Earned Income Tax Credit. According to figures provided by the Internal Revenue Service, “over 26.8 million received almost $59.5 billion in EITC for the 2010 tax year.” According to data provided by the Hoover Institution of Stanford University in a report published April 30, 2004; “Over the last 28 years, the EITC has grown to become the largest federal cash or near-cash assistance program directed at low-income families—with outlays far exceeding Temporary Assistance for Needy Families (TANF) and the food stamps program.” It is obvious that the EITC must be part of the budget deficient reduction discussion.
Fox Business.com reported that government spending for the month of January 2012 was $261.7 billion. The end result of this spending level was a deficit for the month of $27.4 billion. Each month the Federal government is forced to borrow money to pay the monthly deficit. The continued budget deficits will force the President to request that Congress increase the debt ceiling again and again as the country goes deeper and deeper in debt. The consequences of our nation’s growing debt will catch up to us some day, and may in fact destroy our economy.
Kent Conrad, Chairman of the Senate Budget Committee, recently made some strong comments on the U.S. economic crisis. Senator Conrad’s comments were reported by Bloomberg Businessweek in a report written by Laura Litvan, dated February 21, 2012.
An economic catastrophe like the debt crisis in Europe or a Middle East conflict may be the only way to get congressional action this year on a broad reduction of the U.S. deficit, Senate Budget Committee Chairman Kent Conrad said.
“If Europe tanks and begins to drag us down, it may become an acute situation that requires a response,” Conrad said in an interview on Bloomberg Television’s “Political Capital with Al Hunt,” airing this weekend. “Second possibility is Israel attacking Iran. That could create a big run-up in oil prices. That could have dramatic economic effects and also require a fuller long-term response by the United States.”
Many challenging economic realities may come to a head at the same time the nation is in the midst of a Presidential election. It is unwise for people to think that the nation can continue adding to the national debt at the present rate without eventually facing serious economic consequences. Every family in America understands you cannot spend more money than you have coming in indefinitely. Every business owner in America understands the consequences of spending more money on operating expenses than is coming in through sales revenues. The same economic principles that apply to a family’s monthly budget must be applied to the federal budget. You cannot spend more money than you have coming in without eventually facing the reality of bankruptcy.