The Obama Administration's Fiscal Policy for the National Deficit
The federal budget is an important part of the economy in any country; and, as the Deficit in the United States grows, it is more important to maximum employment, production, and purchasing power. The current deficit as a percentage of GDP is near 11% which is the highest since the 1940s during WWII. The government debt is will rise even higher with the recent health care bill which brings unrealistic spending and tax increases. America’s economy is drawing near to fiscal train wreck. One article by Holtz-Eakin states that, within the next 30 years, the 20% of GDP dedicated to federal expenditure could increase to 30 or 40% of GDP. The conditions do not seem to have any improvement in the near future, and the federal deficit will only increase with the recent government’s health care bill. The results of a widening deficit are increased demands from foreign investors and the reduction of the value of the U.S. dollar. The consistent increase in the deficit could greatly drive up interest rates and eventually cause lenders to lose trust in the United States. As the world loses faith in the strength of the dollar, government bankruptcy, economic chaos, and the collapse of the west as an economic power could be at hand. However, in reaction to these bleak times, the Obama administration created the bipartisan National Commission on Fiscal Responsibility and Reform to attend to our nation 's fiscal challenges. The Commission was created to compose policies to improve the fiscal situation in the immediate tenure and to reach fiscal sustainability over the long run. One main goal of the commission is to cap revenue at 21% of GDP and get spending below 22% and eventually to 21%. Various other goals of the Commission include: Reduce the deficit to 2.3% of GDP by 2015, achieve nearly $4 trillion in deficit reduction through 2020, and stabilize debt by 2014 and reduce debt to 60% of GDP by 2023 and 40% by 2035. The Commission will propose recommendations designed
Cited: Holtz-Eakin, D., & Ramlet, M.. (2010). Health Care Reform Is Likely To Widen Federal Budget Deficits, Not Reduce Them. Health Affairs, 29(6), 1136-41. Retrieved December 3, 2010, from ABI/INFORM Global. (Document ID: 2061803851). Bergsten, C.. (2009). The Dollar and the Deficits. Foreign Affairs, 88(6), 20-38. Retrieved December 3, 2010, from ABI/INFORM Global. (Document ID: 1887894831).