The Federal Budget And Why The US Is In Trouble

[novaman]

One of the top stories of recent has to be the big battle on the Hill about trimming the federal budget. Last night an agreement was finally reached that would trim the budget by around 38 billion dollars.

This sounds great until you realize that it amounts to 1% of the federal budget. Yes folks, that's right. All this arguing back and forth for weeks, all this threat of a government shutdown, and they manage to trim 1%.

To put our federal budget and deficit problems in terms we can more easily understand, it is the equivalent of a family that spends 160K a year, but has an income of 100K a year. The husband and wife argue for weeks about what they are going to do to right the ship and they manage to come up with a reduction of 2K, leaving them still spending 158K a year on their 100K salary.

Anyone can see where this is going....and it is not good.

 

[cb7010]

Budget Agreement & Deficit Spending

I would say that one common topic on this forum is the concept of frugality and managing one's money closely.

I've also noticed a great divergence in views on various political topics.

So, here is a simple question:

Who here thinks that it is ok for our federal government to continue spending more money each year than they bring in?

To me, the budget issue is this simple, we must only spend what we bring in each year (less, of course, the amount we must allocate to pay off the existing debt). I would have much less heartburn as a citizen and taxpayer if the politicians were arguing about allocations within a pie chart that totaled 100% of the revenues..yep we could give it all to the arts or to fund abortions or to Medicaid, etc... Instead, we bring in around $2 Trillion and spend $3.6 Trillion and then hail a $38 billion cut as monumental.

 

[cb7010]

I just posted a similar thread, not seeing this one first. I am simply amazed that we allow our government to operate like this, it's pure insanity.

 

[donheff]

I hope you were both railing against the original Bush tax cuts and last year's extension of the Bush tax cuts because both actions vastly exacerbated the problem.

 

[Alan]

I just posted a similar thread, not seeing this one first. I am simply amazed that we allow our government to operate like this, it's pure insanity.

I just merged the thread you started.

One less thread to close when the fighting starts

 

[REWahoo]

One less thread to close when the fighting starts

Whaddya mean "when"?

 

[cb7010]

I hope you were both railing against the original Bush tax cuts and last year's extension of the Bush tax cuts because both actions vastly exacerbated the problem.

I am railing against Bush, Obama and every member of congress from both parties that has anything to do with us spending more than we bring in. It's not worth anybody's time to dwell on who specifically caused this, we should all be focused on how and who we will engage to fix it.

So, I will take that as one vote for repeal the tax cuts, raise taxes, and/or tax the rich. History shows that economies thrive most when taxes, regulation, and intervention are low (this is not my opinion, but historical fact); so, I will be interested to see how our "raise taxes" solution will work?

Personally, my solution would lean toward a gross downsizing of the federal apparatus to cover just the enumerated functions in the constituation along with a cessation of foreign military activities and a more laissez faire economic environment. But, I am aware there are many ways to skin a cat and so long as we are all talking about financial responsibility and getting things back in order, I will be satisfied.

 

[martyb]

What's wrong with tax cuts? How about reducing the waste? Do you believe no matter how much our government wants to take from our paychecks, it's ok....just keep on raising the taxes? To what point...100%? Then what?

We need tax cuts. We need MORE tax cuts, and those need to be funded by CANCELING programs that have no business being paid for with Federal tax dollars.

 

[novaman]

I hope you were both railing against the original Bush tax cuts and last year's extension of the Bush tax cuts because both actions vastly exacerbated the problem.

As we all on these boards already know, it is not how much you make but how much you spend. (and besides, as already mentioned tax cuts do not reduce revenues)

 

[brewer12345]

What's wrong with tax cuts? How about reducing the waste? Do you believe no matter how much our government wants to take from our paychecks, it's ok....just keep on raising the taxes? To what point...100%? Then what?

We need tax cuts. We need MORE tax cuts, and those need to be funded by CANCELING programs that have no business being paid for with Federal tax dollars.

Like the military.

 

[REWahoo]

Like the military.

I like them too...

 

[JOHNNIE36]

I never followed government spending much and hence don't much about about the budget process. I always thought the first thing I would eliminate in the budget would be foreign aid; however, a friend told me that foreign aid was a money making proposition. The government doesn't really give "them" cash, rather it's giving goods and services provided by American business and industry, thereby creating work for our people. Anybody got a handle on this topic? I'd be interested in knowing how foreign aid really works.

 

[NW-Bound]

It will not be a problem! Bill Gross, the Bond King, explains how it will play out. Because we, as a nation, refuse to act (isn't Congress selected by voters?), I do not see a way out, so I tend to agree with Bill Gross.

... the only way out of the dilemma, absent very large entitlement cuts, is to default in one (or a combination) of four ways: 1) outright via contractual abrogation – surely unthinkable, 2) surreptitiously via accelerating and unexpectedly higher inflation – likely but not significant in its impact, 3) deceptively via a declining dollar– currently taking place right in front of our noses, and 4) stealthily via policy rates and Treasury yields far below historical levels – paying savers less on their money and hoping they won’t complain.​

All I can do as an individual is to watch as this unfolds, in order to protect my stash in any which way. Heh heh heh...

Bill Gross's original article is here.

 

[Gumby]

Like the military.

Indeed, our deficit would be substantially less if we would stop invading foreign countries.

 

[chinaco]

It is a show for the next election.

 

[Alan]

Indeed, our deficit would be substantially less if we would stop invading foreign countries.

I wonder if it would have been cheaper to let the Middle East etc do it's own thing, take the hit on sky high oil prices, and invest in alternatives to their oil.

 

[nun]

As we all on these boards already know, it is not how much you make but how much you spend. (and besides, as already mentioned tax cuts do not reduce revenues)

....and we all know spending less and increasing your income is the quickest way to get rid of debt. 25 years of tax cuts and over spending have got us into this trouble. We need to cut spending and raise taxes if the deficit is truly the problem. I would give tax credits in areas that are directly related to growth like capital purchases and actually creating a new job. This is the recipe the US and IMF gives to every foreign country that gets into fiscal trouble, it's interesting that the US can't take it's own medicine.

We need tax reform to eliminate things like mortgage deduction, increase tax rates on the top 10% of income earners, better enforcement of company taxes, encourage growth by giving tax credits on capital expenditures and new job creation, slash the military budget and foreign deployments, increase SS age to 67, get better efficiency out of medicare and medicaid and cover more people. US has and expensive system that is difficult to access and produces poor outcomes. US has same life expectancy as Cuba but spends 10 times as much per capita so there's obviously room for savings without reducing outcomes.

 

[donheff]

I hope you were both railing against the original Bush tax cuts and last year's extension of the Bush tax cuts because both actions vastly exacerbated the problem.

So, I will take that as one vote for repeal the tax cuts, raise taxes, and/or tax the rich. History shows that economies thrive most when taxes, regulation, and intervention are low (this is not my opinion, but historical fact); so, I will be interested to see how our "raise taxes" solution will work?

Personally, my solution would lean toward a gross downsizing of the federal apparatus to cover just the enumerated functions in the constituation along with a cessation of foreign military activities and a more laissez faire economic environment. But, I am aware there are many ways to skin a cat and so long as we are all talking about financial responsibility and getting things back in order, I will be satisfied.

What's wrong with tax cuts? How about reducing the waste? Do you believe no matter how much our government wants to take from our paychecks, it's ok....just keep on raising the taxes? To what point...100%? Then what?

We need tax cuts. We need MORE tax cuts, and those need to be funded by CANCELING programs that have no business being paid for with Federal tax dollars.

As we all on these boards already know, it is not how much you make but how much you spend. (and besides, as already mentioned tax cuts do not reduce revenues)

Good luck guys. I was pulling in loads of $ when the Bush cuts went into effect. I thought they were insane then when they put lots of extra dollars in my pockets. And I think they are insane now. We flourished before them and saw no evidence that those cuts helped us flourish more. They certainly busted the 1990s surplus. I am willing to support drastic cuts in military spending and in health care spending. There isn't much to save outside of those. But we will never get where we need to go without revenue increases as well.

 

[DallasGuy]

Indeed, our deficit would be substantially less if we would stop invading foreign countries.

+1

 

[eridanus]

We need tax reform to eliminate things like mortgage deduction, increase tax rates on the top 10% of income earners, better enforcement of company taxes, encourage growth by giving tax credits on capital expenditures and new job creation, slash the military budget and foreign deployments, increase SS age to 67, get better efficiency out of medicare and medicaid and cover more people. US has and expensive system that is difficult to access and produces poor outcomes. US has same life expectancy as Cuba but spends 10 times as much per capita so there's obviously room for savings without reducing outcomes.

Good start. How about another sacred cow, the DOT?

 

[GregLee]

So, here is a simple question:

Who here thinks that it is ok for our federal government to continue spending more money each year than they bring in?

It's okay by me. I see a lot of huffing and puffing about how disastrous it will be unless we balance the federal budget, and occasionally I insert into a thread a plaintive request for some evidence that we can't just keep the deficits going forever. There seems to be unanimity that we can't, but none of you seems to be able to say exactly why.

 

[beowulf]

I wonder if it would have been cheaper to let the Middle East etc do it's own thing, take the hit on sky high oil prices, and invest in alternatives to their oil.

+1

 

[Westernskies]

I hope you were both railing against the original Bush tax cuts and last year's extension of the Bush tax cuts because both actions vastly exacerbated the problem.

To be fair, shouldn't the "extension" approved last year be Obama's tax cuts? after all, he's been President since January 2009

 

[Westernskies]

What's wrong with tax cuts? How about reducing the waste? Do you believe no matter how much our government wants to take from our paychecks, it's ok....just keep on raising the taxes? To what point...100%? Then what?

We need tax cuts. We need MORE tax cuts, and those need to be funded by CANCELING programs that have no business being paid for with Federal tax dollars.

+1

 

[Westernskies]

I wonder if it would have been cheaper to let the Middle East etc do it's own thing, take the hit on sky high oil prices, and invest in alternatives to their oil.

Hindsight is always 20/20.