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The Debt is Too Damn High
John R
Mr. Bourjaily
AP. U.S. History, Period 3
June 10, 2011
America is in the midst of a debt crisis not seen since that 1940s. The national debt is currently at 14.4 trillion dollars, and is nearing the Gross Domestic Product of 14.7 trillion dollars. Without action, there would be no recovery. However, there is more bickering being done in Legislature rather than creating a bipartisan agreement for a budget that would rescue us from this unnecessary hole we dug ourselves into. We cannot sit idle while people of power compromise our generation’s future because of their inability and/or unwillingness to do what is necessary.
One of the biggest issues that must be faced is the Medicare, Medicaid, and Social Security costs. In 2010, the cost of Medicare, Medicaid, Children’s Health Insurance Health Program (CHIP), and Social Security accounted for 41% of the national budget. In contrast, the spending for education is only 3%. Consider that by 2030, the 65 and over population would have doubled. Current entitlement spending is unsustainable, uneconomical, and unfair for future generations.
Of course, politicians are hesitant. They fear that they would receive punishment from their AARP overlords. They know that cutting entitlement spending is critical to America’s hope for a surplus, yet deny that entitlement spending is a big issue. The AARP has them on a short leash.
It’s time for our generation to stand up and remind the politicians that senior Americans are not the only ones they are representing.
Now then, we can move on to the next issue, Defense spending. Defense spending accounts for 20% of the national budget as of 2010. I normally have no qualms about spending for our nation’s security, but when you wage two wars with borrowed money that you have no idea how you would pay for, there is a serious problem. That is exactly what President Bush did. The total cost for the wars in Iraq and Afghanistan totaled $170 billion in 2010. There has to be spending slashes in defense, now that the war in Iraq is over, and we have to limit our responsibilities abroad so that we can fix our own problems back home.
The longer we wait, the dimmer our situation gets. Decisive actions must be made. Because, quite frankly, the debt is too damn high.
The United States’ wallet is hanging precariously over the abyss of bankruptcy. With 14 trillion dollars in debt and rising, rewriting the budget is not a convenience, not a nicety, but a necessity to America’s continued existence. But in order to rewrite the budget, in order to ensure a brighter future to our children, in order to move America into a new era, we must revise many social programs, particularly Medicare.
Medicare is health insurance administered by the United States Department of Health and Human Services, which serves Americans 65 or older, those under 65 with certain disabilities, and people who meet other special criteria. The program was originally enacted as a part of the Social Security Act of 1965 meant to amend previously existing Social Security legislation and was signed into law by President Lyndon B. Johnson. It is funded by payroll taxes paid by the American people (About 2.9%).
Eligibility for Medicare automatically opens for American Citizens or those who have lived legally in the United States for at least 5 years and are 65 or older. Americans under that age limit who qualify for Social Security Disability Insurance (SSDI) are also eligible and those with certain other criteria also qualify. Many Americans happen to be eligible for both Medicare and Medicaid, which makes them “dual eligible.” If they cannot pay the premium for Medicare, they use money they receive from Medicaid to pay.
Medicare operates on four parts, labeled A, B, C, and D. Part A pertains to coverage of hospital costs for stay and other fees. Part B mostly covers insurance for outpatient procedures such as X-Rays, diagnostic tests and other physician services. Part B also covers medical instruments such as wheelchairs, canes and prosthetic devices. Part C is an alternative plan in which those people who qualify to receive both benefits A and B can choose to receive them through another provider organization under Part C. Finally, part D covers medication prescribed by doctors for their patients.
Since the US National Debt is on the verge of going from the “Critical” level to the “Fatal,” spending needs to be reduced greatly, and there’s no better place to start than Medicare – it accounts for about 20% of our budget, or $599,000,000,000, as of 2008. There are a few ways to reform Medicare in order to reduce the nation’s spending obligations, of course paired with cuts to the program. Perhaps the most logical is to raise the age at which a citizen qualifies to receive benefits. In fact, this was how the program was initially designed – the qualifying age was actually higher than the life expectancy of the average American. However, this would have to be done gradually so that it does not cause an uproar with the 65-or-better crowd. Thus, the qualifying age could be raised a few years every decade, or the new qualifying age could be made effective to those born after a certain date. For example, the government could mandate that those born after January 1, 1990 will qualify to receive Medicare benefits after they reach the age of, say, 70. Doing this would significantly decrease the amount of Medicare recipients, and, thus, would reduce the government’s obligations to the program.
Another remedy to the nation’s increasing Medicare obligations is to make the tax that pays for Medicare optional. Granted this would take out just as much revenue as it would recipients, if optional Medicare were supplemented by a revenue-increasing reform, such as an age-raise or a tax increase, then the government would be able to save money and curb the increasing cost of healthcare. The only issue this raises is the case of a person who thinks that they are financially secure and choose not to pay the tax, and then wind up in a situation where they cannot pay for healthcare. In this case, the government would have to (be warned: this next concept is scary) actually hold these citizens accountable for their choice. Chances are, however, that these people would have access to financial or medical help from their families, communities, churches, etc., and would probably be okay in the end.
A third option would be means testing the Medicare recipients. This would indeed raise revenue and reduce the amount of recipients, but it poses many problems. In this system, a citizen would have to be below a certain economic status to qualify for Medicare benefits. In more plain English, the rich would not be allowed benefits and would have to pay into the system anyways. Given that the government already forces the rich (top 1% economically) to pay for 21.5% of all federal and state taxes, it just seems more unfair that they would be forced to pay into a system that they are not allowed to draw out of. Sure, the rich wouldn’t need assistance, but it is still unfair to make someone pay for something and then not give them the option to receive it. However, if there were a cutoff income for which those who are above the line do not pay the tax and do not receive the services provided by Medicare, then the system would be fairer.
So in the end, the most promising solution to the Medicare problem seems to be gradually raising the eligibility limit since it accomplishes the goal of reducing the breadth of Medicare coverage and spending without potentially reducing revenue for the government like the optional tax and without unfairly taxing a small demographic group. What is most imperative is that the United States needs to find a suitable solution to the looming disaster on the horizon. With the estimated 70 million Baby Boomers expected to join a system that was made for a considerably smaller generation, the country will find itself descending into an economic tailspin if this issue is not dealt with in the next few decades.
US Federal Budget Proposal
Ian R and John G
[All figures are in billions of dollars]
Overall
| Category | Actual FY2012 Budget | Our Proposal |
| Receipts | 2,627 | 3,246 |
| Outlays | 3,729 | 3,383 |
| Deficit | 1,101 | 137 |
Outlays
| Category | Actual FY2012 Budget | Our Proposal |
| Security (discretionary) | 884 | 878[1] |
| Non-security discretionary | 456 | 446[2] |
| Social Security | 761 | 566[3] |
| Medicare | 485 | 364[4] |
| Medicaid | 269 | 269 |
| Troubled Asset Relief Program | 13 | 0[5] |
| Other mandatory programs | 612 | 612 |
| Net interest | 242 | 242 |
| Disaster relief | 6 | 6 |
| Total outlays | 3,729 | 3,383 |
Receipts
| Category | Actual FY2012 Budget | Our Proposal |
| Individual income taxes | 1,141 | 1,495[6] |
| Corporation income taxes | 329 | 593[7] |
| Social Security payroll taxes | 659 | 659 |
| Medicare payroll taxes | 201 | 201 |
| Unemployment insurance | 57 | 57 |
| Other retirement | 8 | 8 |
| Excise taxes | 103 | 103 |
| Estate and gift taxes | 14 | 14 |
| Customs duties | 30 | 30 |
| Deposits of earnings, Federal Reserve System | 66 | 66 |
| Other miscellaneous receipts | 20 | 20 |
| Total receipts | 2,627 | 3,246 |
Explanation of changes and projection methodologies
- $5.7 billion annually could be saved by restructuring the Department of Defense’s healthcare administration system, according to the GAO.
- According to the GAO, following their specific recommendations for elimination of redundancy, waste, fraud, abuse, and mismanagement in the Executive departments “could result in tens of billions of dollars in annual savings.” Including the GAO’s plan as part of our budget proposal, we cut $10 billion for non-security discretionary spending to reflect such efforts at streamlining government operations.
- We propose raising the eligibility age for Social Security benefits for retired workers and aged widowers to 70. The annual savings in Social Security were calculated by multiplying the number of Social Security beneficiaries of each age under 70 (a total of about 14 million) by the average annual spending per beneficiary for each age group (about $14,000). This resulted in a savings of $195 billion.
- We propose raising the eligibility age for Medicare Parts A & B to 70. The annual savings in Medicare spending were calculated by multiplying the number of Medicare beneficiaries under the age of 70 (about 16 million) by the average annual spending per beneficiary (about $7,400). This resulted in a savings of $121 billion. Unfortunately, the data used in our calculations, the most recent available, was from 2004.
- TARP was intended to avert a collapse of the nation’s financial markets; since that is no longer a threat, continued spending on it is unnecessary.
- Gains achieved by repealing the 2001 and 2003 Bush Tax Cuts and restoring individual income tax rates to their 2000 levels. Taxes brought in revenue amounting to 10.2% of GDP in 2000, so we estimated current tax revenues with 2000 tax rates as 10.2% percent of today’s GDP.
- Corporate profits in 2010 amounted to approximately $1,756 billion. To estimate the gains by raising the effective tax rate to match the statutory tax rate for high-earning corporations, we took 15% of this amount ($264 billion) and added it to the current national corporate tax liability. This is, in all likelihood, a generous underestimation of the statutory tax liability of the nation’s largest corporations.
Conclusion
The United States is currently facing a national debt that is close to equaling our Gross Domestic Product. If our national debt continues to grow at its current astronomical rate, it will someday be untenable. Unfortunately, at the moment, that growth rate shows no sign of slowing. We believe that, ideally, our nation should run a modest annual surplus, so that we can begin to pay off the principal of our debt. To our dismay, it seems that members of Congress from both parties disagree with that belief. They continue to display their customary lack of efficacy in making any meaningful progress towards stabilizing the nation’s financial state. In spite of this, we strove to use our much more limited time and resources to propose changes to the federal budget that would save the country money without harming America’s citizens, and then project the exact effects that those changes would have on the budget.
The above proposed federal budget succeeds in reducing the nation’s annual deficit to only about 12% of what it currently is. It makes deep cuts into Medicare and Social Security and raises taxes substantially to accomplish this. However, we believe these drastic measures, and more, are necessary. Our proposed budget does not succeed in generating a surplus, however, it is our hope that changes we did not specify would be able to close the $137 billion deficit our proposal leaves. We excluded longer-term changes, such as withdrawal of our military forces from Iraq and Afghanistan, which would save hundreds of billions of dollars annually, as well as changes we felt necessary but that we were unable to accurately project the effects of, especially the elimination of inefficient and redundant programs in the civil discretionary spending category.
Data and statistics sources:
White House Office of Management and Budget (whitehouse.gov/omb)
Congressional Budget Office (cbo.gov)
Government Accountability Office (gao.gov)
Social Security Administration (ssa.gov)
US Department of Commerce Bureau of Economic Analysis (bea.gov)
CIA World Factbook (https://www.cia.gov/library/publications/the-world-factbook/
Julia Z, Dani W, Madeline W, Mike R
Dr. Halla
AP Government, Pd. 3
30 May 2011
Project Paper
Creating a Budget to Meet America’s Needs
America is experiencing a debt crisis. The debt towers at a mind-boggling $14.36 trillion and grows by almost 4 billion daily (Hall). America does not have the financial resources to sustain such spending for much longer, considering that already the debt almost equals the country’s Gross Domestic Product, which stands at 14,660.4 billion (“Current Dollar”). America needs a revised budget to fit its needs, one that will not send the country spiraling down into bankruptcy.
Thanks to modern medicine, people are living for longer than they did when social security was first designed. Also, all the baby boomers are at the age of retiring, further increasing the number of elderly in the country relying on social security. This has increased the cost of social security to become roughly twenty percent of the current budget (“Policy Basics”). To accommodate for the longevity in the elderly, the age for social security benefits should be moved up to 70 years of age in order to decrease costs. This saves the government money while still keeping the program alive. This is more of a long term policy because those who are reaching the current age of 65 deserve their money when it was promised to them. Social security should also be scaled to save money so that affluent elders, who can rely on their own savings in their old age, get less money than those who have so little money that they rely solely on social security money. This would help the government spread its limited funds to reach more of the elderly without running out of money. One way to encourage the elderly to have more money in their bank accounts is to grant income tax breaks for those who work after the retirement age.
In order to maintain control over the national debt in the future, the debt ceiling should be lowered by 50 billion every ten years as the government annually pays off as much as reasonably possible of the debt. The government should also mandate states to create programs to teach children the basics of finance in school. Adult programs at local public centers on how to manage their household finances will help people become more responsible consumers, thus improving the country’s economy.
Defense spending is another twenty percent of the budget (“Policy Basics”) and cuts to this portion of the budget will free money for the government to pay off debt. Military research and development could be cut by 10% to save money. The military could also sell stuff that they are phasing out of operation. They need to check the backgrounds of who they are selling to; however, to make sure that the buyer is not a threat to the country’s security. Programs such as Xe, nuclear defense, and railgun development could also be cut to minimize costs.
Healthcare, consisting of Children’s Health Improvement Program, Medicare and Medicaid, account for the largest portion of the budget and grow in cost annually. To minimize some of the cost of medicare, the age for eligibility should be raised to 70. Aid should also be scaled based on income in order to make the program more manageable. Healthcare should be reformed and streamlined to make spending more efficient within the programs. Medical malpractice reforms would cut the cost of what the government programs pay to individuals on an as-needed basis. These measures are necessary to keep the programs alive without having them consuming the budget.
The federal government spends about three percent of its budget on education (“Policy Basics”). The education system should be streamlined by cutting overhead positions and unnecessary spending. Eliminating charter school would also decrease costs. However, education is an investment in the country’s future and therefore cuts to this area of spending should be avoided.
The Environmental Protection Agency is the federal government’s environmental program. The EPA should be reformed and broken into smaller, more focused sub-programs that tackle individual problems to make the program more efficient and cost effective. A measure to incentivize environmentally friendly actions and methods could be to strengthen environment tax credits and promote ways to make recycled fuel cheaper. This would keep the government from having to spend a lot more money on the environment while still making progress toward a cleaner America.
The money for our budget comes from taxes. Loopholes for corporate statutory tax can be removed to increase the money the government gets from the business sector of America. The government can also pass policies to incentivize small business that will create new job opportunities and provide the government with more income tax revenue. Income taxes should be reformed to be graduated, with the heaviest taxes going to the richest with incomes over $200,000 per year. Taxes should also tax net worth, including assets along with the traditional property taxes. Cutting the Bush tax cuts will also provide the government with more revenue. All money coming in from these changes would go directly to paying off the debt in order to eliminate it.
The budget includes money set aside for transportation, which deals mostly with America’s infrastructure. To save money, the US should levy a use tax on companies who will be the heaviest users of the proposed roads. In order to create more jobs, the government should sponsor programs to build more ports and revamp dams. Costs of construction can be cut by using prisoners to build the roads. Quality control could be ensured by lessening the prisoner’s sentence based on work.
If America does not change its spending habits, the economic downturn will cause instability all across the country and in the government. Action must be taken before such an economic collapse, or generations of Americans will have to suffer the consequences.
Works Cited
“Current Dollar and ‘Real’ GDP.” U.S. Bureau of Economic Accounts. U.S. Dept. of Commerce, 26 May 2011. Web. 5 June 2011. <http://www.bea.gov/national/index.htm#gdp>.
Hall, Ed. “U.S. National Debt Clock.” U.S. National Debt Clock. N.p., 2 June 2011. Web. 5 June 2011. <http://www.brillig.com/debt_clock/>.
“Policy Basics: Where Do Our Federal Tax Dollars Go?” Center on Budget and Policy Priorities. Matrix Croup International, 15 Apr. 2011. Web. 5 June 2011. <http://www.cbpp.org/cms/index.cfm?fa=view&id=1258>
Sohrab S’ Creating a Budget to Meet America’s Needs Environmental Reform: Influencing the World while Cutting Expenses
Posted: June 8, 2011 in Papers/ AnalysisCreating a Budget to Meet America’s Needs
Environmental Reform: Influencing the World while Cutting Expenses
America is most often regarded as the nation that creates the world’s worst influences when it comes to living an environmentally friendly lifestyle. One of the most predominant reasons why this is so is because of the widespread ignorance that spreads like wildfire; we often ask how this can be changed to help prevent not only worldwide pollution but dependence on foreign fuel sources (that may increase the chances of war) and hazardous health problems (that could spike Medicare and Social Security issues through the roof). While currently thought as the petty affair by a majority of Americans plagued by ignorance, solving the environmental problem currently acting as the elephant in the room can not only bring future serenity amongst environmentalists worrisome of the deterioration of our planet (which is beginning to develop an airtight, scientifically proven case that people can no longer ignore) but can also severely cut foreign oil dependence and provide healthier lives for the residents of this nation. The beneficial sides of the argument overwhelmingly supersede the losses, which may be the time it may take towards reaching a more educated public and get people to vote towards a cleaner future of America and the world.
Environmentalists for forty-plus years have been rampant about the disastrous effects our addiction with oil causes, and yet, standards have little changed since then. It is often stressed that in order to be most socially competent on the road, the biggest car with the biggest engine must be driven. While this has been spoon-fed to society as the popular and most socially acceptable way to shop for cars, it is no wonder the money spent on US imported oil is about $489 billion. Money spent on imported oil from OPEC countries runs the nation about $182 billion. While $671 billion may only represent 1.2% of the United States’ debt, this is still a whopping amount of money spent on energy that could be put to good use in other more needed areas, such as investing money to support studies that may provide the world with alternative, eco-friendly energies that may be greater than oil in terms of efficiency and equal or greater in power. While continuing the use of oil has become convenient for us, we can no longer choose to be oblivious to the harsh realities of the immense amount of expenses spent on something intelligent American research can easily replace in a potentially short period of time.
The amount of oil we burn affects our Medicare rates, as well. When people have more health issues as well as more complex ones, Medicare rises in costs. According to Stanford scientist Mark Jacobson, areas with higher levels of CO2 in the local atmosphere have been linked to higher mortality rates in said areas. However, people don’t just collapse and die out of no prior signs of illness. Elderly will tend to portray respiratory issues as well as intolerance of high temperatures. Because of this, Medicare rates rise due to increased hospital attendance of the elderly. Social Security rates have also rise dramatically due to increased oil consumption. When gas prices rise, the overall market tends to stagnate, which is considerably bad news when one regards the 3% growth needed to bounce back from a recession. At the moment, the United States is currently at a 0.3% growth rate due to a combination of a 12.4% Social Security rate as well as the high gas prices mentioned earlier (about $3.761 being the national average price for one regular gallon in June 2011). When these two factors take up a considerable fraction of your money, the American public tends to save rather than spend which in turn slows the economy dramatically. In conclusion, if oil was not a factor and more efficient alternative fuels such as hydrogen and electricity were utilized, we would not only majorly cut the money spent on oil but spark the United States’ economy by being able to create our own energy resources.
However, successfully pointing a different direction for the country to follow cannot happen overnight. Firstly, in order to get people to vote towards a more environmentally friendly future, a different education must be pushed through our growing youth, taking advantage of their undeveloped opinions. Attempts at telling the rest of our aged population may take place but would not be as effective.
fixthedamnbudget 