http://www.thedailybeast.com/articles/2013/09/14/oh-look-there-goes-the-deficit.html
In what may seem like a startling turn of events in light of the rampant growth of the Federal Government's annual budget deficit this past decade, deficit spending is actually starting to shrink. While I had expected the sequester to help rein in deficit spending when it was implemented last March, I did not expect it to make quite the impact it appears to have made on the National Debt. The author of the article attributes the 35%, $409 billion reduction in deficit spending since last year to a 15% increase in tax revenue, and a 3.6% reduction in government spending. I agree that these two statistics represent monumental turnarounds for the financial state of the federal government, but I also believe that even greater spending cuts will be necessary for the U.S. Government to get its fiscal house in order.
The implications for the economy as a whole on this issue are huge. While the unemployment rate has been declining, most companies have been reluctant to hire more new employees for the past few years as a result of uncertainty in the the nation's economic stability in the near future. Without the burden of a rampantly growing national debt, employers may have a new incentive to begin creating more jobs, which may finally mark a complete recovery from the Great Recession. While the stock market has recovered all of its losses from the housing market crisis of 2008 and the Dow Jones Industrial Average has reached all time highs, the high national unemployment rate has remained a major obstacle to a full economic recovery.
While the author of the article mentioned some good reasons for the deficit to be decreasing, I did wonder why he didn't write about the rebound of the stock market. Last summer the stock market made significant gains which means that capital gains taxes must have brought in a greater amount of revenue, which could certainly have affected the deficit. Overall, I found this article to be interesting and insightful, and I am happy to see that deficit spending is finally shrinking.
He didn't mention it because it isn't a big factor. The capital gains tax is far to easy to maneuver around and negate. By doing that many people are are escaping paying a lot of money to the government and they have been doing that for a while.
ReplyDeleteI don't have an extensive knowledge on politics or such issues.. however, it is obviously a good thing that the deficit is decreasing. As we learned in class, businesses, households, and the government all work together in a cycle to benefit from the output/input of each other. Each individual system can also benefit from such a cycle. As David said, the decreasing deficit can also lead to other positive economic changes, such as more jobs being created by businesses. And when businesses benefit, so do households. And when businesses and households benefit, so does the government. Economic stimulation in all areas is the most beneficial.
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