Public Debt and Budget Deficit

Tuesday, March 24, 2009 at 7:41pm
The issue of the state of the US federal budget is a very critical one. The numbers that have been recently released by the Office of Management and Budget as well as the Congressional Budget Office are staggering and demonstrate the extent of this economic crisis. Though acknowledging the urgency of the American Recovery and Reinvestment Act and the various proposals made by president Obama to promote long-term economic growth and create jobs that will finally help overcome this crisis (in an combined effort to reform the banking system which is, I think, underway), I must not neglect the pressing situation for taxpayers and future generations. The OMB (Office of Management and Budget) predicts a 1,752 billion dollar budget deficit for the FY 2009. The CBO (Congressional Budget Office), however, reckons with a 1,845 billion dollar budget deficit. The debt held by the public will increase to 8,364 billion dollars according to OMB, and 7,987 billion dollars according to CBO.
This high level of continuing accumulation of public debt is even according to OMB director Peter Orszag unsustainable. Even though we face tough times the endless spending is irresponsiblle and I hope that the Obama administration will focus on a deficit reduction plan that does not harm American people but still approaches a balance.Two things have to be dealt with that is very complicated to achieve but with perserverance doable: the budget has to be trimmed as much as it appears reasonable. Obama already announced to eliminate wasteful spending and programs and achieve more efficiencies without eliminating important programs and services. But that is not enough. In order to afford the more and more expensive health care coverage and provide better schools the taxpayers must pitch in and be ready to pay more taxes (a decision that ought to be delayed due to the crisis, but should not be ruled out). Which taxes should be increased remains uncertain for me, because I understand the sensitivity of this issue. However, in order to avoid letting our children and grandchildren suffer- as many spending-phobic Republicans in House and Senate complain (it was however their Republican president that helped getting us into this fiscal mess)-we have to get the economy growing again which justifies the use of Keynesianism right now. With a financial crisis damaging our economy, small businesses, big businesses, families and individuals we cannot adequately address the budget deficit and the mounting debt plus interest.
I am happy to hear less complaints from Washington, but more responsibility and feasible solutions. (page 114) (page 22, Table 1.-4.)
Total deficit or surplus as percentage of GDP

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