The United States Budget Deficit For Fiscal-Year 2011


Monday, February 1st, 2010

Keep Adding Zeros And Pretty Soon You’re Talking About Real Money!

The Obama administration has issued its budget for the upcoming year, and the numbers are staggering. Unfortunately though, the numbers are not positive, but are record setting in terms of the level of deficit that the United States will be facing for years to come. The number for fiscal 2011 is $1.3 trillion, with a capital T, on top of this years expected deficit that will come in at $1.6 trillion.  

For the subsequent years the deficits are expected to stay equally large, and in fact may be even worse than the Obama administration expects them to be. The reasons for that lie in the projections that are used for economic growth, and the revenues that will be generated based on that assumed growth. For 2011 the Obama administration projects GDP growth at a positive 3.8%. Should the numbers vary from the estimates even slightly, the resulting increase to the actual deficit could be extremely large.

One aspect of the Obama plan includes rolling back the Bush tax cuts. This raises the argument over whether tax hikes result in more revenue, or whether the lower levels of tax rates actually result in increased revenue. Many economists believe that the higher tax rates will in fact stand in the way of economic growth and therefore result in lower revenues as well as pose a risk to the economy. As Ronald Reagan showed when he came into office, the lower tax theory seems to hold true.

If we consider the fact that it is the wealthy who start businesses, create jobs and pay the lions share of the tax-burden, then specifically targeting the tax increase at these people will most likely be counter productive.

The Democrat and Republican parties in the United States have differing views on the way in which to solve the economic and fiscal crisis that the country finds itself in. On the one hand the Republican Party is of the view that lower taxes and less government involvement is the way in which to right the fiscal ship. Democrats on the other hand, believe that raising taxes and greater government involvement is the way to go.

The United States as well as the rest of the world’s economies will continue to face an uphill climb for the immediate future. The facts are clear, but the solutions certainly less so. One thing is certain, which is that it is the futures of our children and grandchildren that are at stake, and that strong and sensible leadership is required.

This is not the time for leadership to be opening the floodgate for irresponsible spending that is meant for political, as opposed to economic gain.



Article by Michael Haltman

The views expressed are the subjective opinion of the article's author and not of FinancialAdvisory.com



Tags: budget , business , deficits , economy , financial crisis , gdp , jobs , obama administration , politics , taxes , united states

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