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Policy Agenda of Budget Deficit and DebtResearch Paper

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Large Federal Budget Deficit and Debt

For the present fiscal year which draws to a close on Sept. 30th, with 2.6% or $468 billion of the country's whole economic production, the figures of the Congressional Budget office or CBO fixed the deficit in the budget way beneath the mean share of the last 50 years (Timiraos, 2015).

It is forecast that the deficit in the federal budget will progress on a downward trend even after next year such that even with the economic circumstances seeming to grow, the red ink of the government will still go up in 2017 and rapidly grow especially with a population that is aging. As per the CBO forecast, this will be as a result of increases in social security spending, Medicaid and Medicare. This budget will be underlined by a sectional division about policy decisions after the recession has weathered away even though presently it has gathered full momentum (Weisman, 2015).

The budgetary proposal recently by the president did not address the imbalance in the budget through the 10-year window it had. This alone should not be a case to call for surprise because despite the Republicans contrary claims, the degree of spending cuts needed to create a balance in the books of the government for even 10 years or more would not be politically acceptable in the absence of a major economic growth miracle (Garver, 2015).

Moreover the budget office, still tackling the federal budget as part of the policy agenda, said that such a huge and increasing debt would bring severe negative repercussions such as limiting the chances for long-term economic growth. This is pushing up federal spending to pay interests, predisposing policy makers not to be amenable to flexible responses to unforeseen obstacles and ultimately increasing the risks of an imminent fiscal doom (Weisman, 2015).

The figures published recently by the White House about Obama's 2016 proposed fiscal budget revealed that the deficit facing the federal government will grow by 20% in the present- 2015- fiscal year, despite the prediction by the administration that the Treasury generated outstanding revenue during this period. In the Summary Tables appendix, Table S-1 about the budget of Obama shows that the deficit stood at $485 billion in the fiscal year 2014 and this will grow to $583 billion in the fiscal year 2015 which will be a 20.2 increase or $98 billion (Jeffrey, 2015).

This is projected to shoot up quickly to $953 billion in the year 2023 and it is thought that by 2025 the yearly deficit will top $1 trillion. It is predicted by the budget office that with the present policy in place, over the coming decade, the government will inject a further $7.6 trillion to the existing $18 trillion the federal government owes (Weisman, 2015).

In addressing the federal debt, during the 2008 and 2012 campaigns, President Obama made the following promises:

Create a small window of exclusion for investments that qualified for the Small Business Jobs Act- 2010 as a means of eliminating capital tax gains for start-ups and small businesses.

He initiated strategies to increase gains in capital dividend rates affecting higher income households to 28% in order to increase dividend taxes and capital gain for high-income taxpayers

Since January 2011, the program had issued permanent modifications on loans to just 500,000 homeowners, he proposed to create a fund for foreclosure prevention for people who owned homes

To take advantage of the peer-reviewed manufacturing process, he promised to create an Advanced Manufacturing Fund

To create a program that would encourage efficiency in the manufacturing sector, he promised to double the funds for the Manufacturing Extension Partnership. So far, he has substantially been able to increase funding for this program, especially during his first 2 years in office although presently this has not doubled

Enabled minorities to access capital loans. The stimulus provided $14.7 billion loan to small businesses by Nov. 13, 2009 out of which 20% went to businesses owned by minorities, this is according to officials with the SBA

He also promised that economic justification for tax changes would be required

In order to rejuvenate the Research and Development tax credit which expired in 2011 and was rendered retroactive in 2012 up to 2013, he promised to make the Research and Development tax credit permanent

Establish and create an initiative for small businesses in rural America

For poor communities, he promised to private-public incubators for businesses

Since he had already made public infrastructure a key priority with the stimulus act of 2009 with an allocation of nearly $100 billion for infrastructure and transportation in order to pave way for up to 2 million jobs and provide a stimulus of nearly $35 billion annually for new economic activities, he said he would form a $60 billion bank for constructing bridges and roads.

He proposed to legislate fresh regulations in the financial sector by introducing new provisions such as new mortgage rules and compulsory audits for the Federal Reserve Emergency lending, and formation of a Financial Bureau.

He also promised to leverage small businesses by expanding loan programs for them. Under this program, the government would for a limited time by the guarantor cover up to 90% of all loans.

For companies that increased job opportunities, he promised to form a $3,000 tax credit, and so in 2010, March 18th, he signed into law the jobs bill for $17.5 which officially became known as the Hiring Incentives to Restore Employment or HIRE Act. The bill allows businesses a chance to have write-offs on what is invested on equipment during 2010 and through reforms in municipal bonds to maintain investment in bridges and roads.

The president set a target of creating 1 million job opportunities in the manufacturing sector by the end of 2016, and in order to promote U.S. goods, he proposed to remove trade barriers, promote strong growth, and expand access to credit so the U.S. exports could be doubled over the next five years.

He said he would reduce the rate for manufacturing companies by overhauling the corporate tax code.

Temporarily suspend taxes on insurance benefits and also extend the insurance benefits on unemployment.

He also proposed to help companies that drew jobs to the U.S. from overseas by creating a new tax credit for them. The document stated that the administration would provide tax incentives for locating business opportunities and jobs in the U.S. And these incentives would be in tandem with tax deductions for shipping jobs overseas. This was estimated by the administration to cost $212 million over the next 10 years.

For offshore companies that shipped jobs overseas, president Obama proposed during the 2012 election campaign to end tax deductions. These provisions would enable such companies not to pay U.S. taxes on any income that was generated by their overseas branches for a time till they were able to repatriate such benefits/profits back home. For his budget proposal for the fiscal year 2014, Obama made the first move to address this promise. He also proposed to disallow deductions for transferring production abroad, and at the same time provided a fresh tax credit for transferring production back home as an aspect of a larger reform of the corporate tax code (Politifact.com, 2015):

By championing almost $800 billion in spending, Mr. Obama reacted and responded to the imminent economic fall snd made certain progressive inroads on the matter (Timiraos, 2015). When he assumed office in 2009, Jan 20th he quickly singed the American Recovery and Reinvestment Act (ARRA) in to law on 17th Feb 2009. This was his economic stimulus bill. And by 11th March, 2009 he again signed the Omnibus Appropriation Act, 2009. The Washington Post described this as a $410 billion bill to help in funding many of the federal government activities for the rest of the year (Jeffrey, 2015).

In the last fiscal year in 2008 when George W. Bush was the president, the deficit of the federal government stood at $458.6 billion and in the following year, 2009, the deficit was $1.4127 trillion despite the fact the both Obama and Bush presided over it. It shot higher to $1.2944 trillion in 2010, $1.2996 trillion in 2011, and by 2012 it stood at $1.0870 trillion while in 2013 it fell to $679.5 billion and in 2014 it further dropped to $484.6 billion. Now for the fiscal year 2015, it is estimated by the OMB that it will shoot back to $582.5 billion (Jeffrey, 2015).

In a speech while he was releasing his proposed budget, the president said that since he took office, the deficits of the federal bureau had been cut by about two-thirds. He further added that from 2010, his proposed budget had shrunk the deficits at an unimaginable historic pace which he contended was the most rapidly sustained reduction in deficit since the time immediately after the Second World War. His move away from austerity measures in 2014 was followed by another great decline in the deficit which brought it to almost… [END OF PREVIEW]

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