Balanced Budget Essay, Research Paper

Balanced Budget

Thomas Jefferson stated, “I place economy among the

first and most important virtues, and public debt as the

greatest of dangers. To preserve our independence, we must

not let our rulers load us with perpetual debt” (Grinsburg

1). This quote illustrates the importance of maintaining a

balanced budget; therefore, it is necessary to stand firmly

resolved that the government should balance its budget.

Three main arguments uphold this premise. They are as

follows: 1. It is feasible for the government to balance the

budget, 2. A budget deficit harms the United States through

creating a trade deficit and increasing the national debt,

3. A balanced budget would benefit the United States by

providing extra funds for social programs, tax cuts, and

reducing the national debt.

Argument 1: It is feasible for the government to balance its

budget

On of January 7, 1998, the U.S. Congressional Budget

Office released a budget forecast that “shows the federal

budget to be in effective balance, with a projected deficit

of just $5 billion this year a trivial percentage of an

estimated $8.5 trillion gross domestic product” (Bartlett

8). The government was able to balance the budget without

causing negative complications. This balance came absent of

any significant tax increases and/or government cuts in

spending. Because the United State’s economy has been

relatively productive in the past few years, the government

was able to balance the budget through an increase in tax

revenues. During this time the government was actually able

to increase its spending somewhat, while the American people

were free from additional tax burdens. In fact, according

to the U.S. Treasury Department, “federal revenues are up

10.5% over the same period a year earlier, while spending is

up only 3.8%” (Bartlett 6). Essentially, this shows that it

is not only possible for the government to balance its

budget, but it can also be done without negative

consequences. Maintaining a budget deficit, on the other

hand, drastically hurts the stability of the U.S. economy.

Argument 2: A budget deficit harms the United States through

creating a trade deficit and increasing the national debt

Almost everyday on the news one hears something about

the Federal deficit and the U.S. budget problems. Currently,

the Federal deficit is over five trillion dollars, and that

divided out among the U.S. population equals over nineteen

thousand dollars per person. This enormous debt couldn’t

have been created overnight. The government’s failure to

balance the budget resulted in both the large trade deficit

and large national debt.

First, the government needs to focus on the trade

deficit. Lowering the budget deficit will help the American

public with national savings which, in the long run, will

rescue the trade deficit. “The ballooning federal deficit

had cut national savings far below the nations investment

needs. As a result, the U.S. had to import capital from

overseas, which inevitably resulted in a trade deficit”

(Koretz 1). The main point of all this is that private

savings is down, and needs to be brought back up. “Thus,

while the public sector’s saving performance has improved

mightily in recent years, America’s household savings rate

has plummeted to its lowest level in 39 years leaving the

U.S. still highly dependent on foreign capital (Koretz 1).

Another key point to this issue is high foreign debt. By

1997, the U.S.’s “net foreign debt was more than 1 trillion

and was increasing at an annual rate of 15 to 20 percent,

with Japan owning almost $300 billion and China more than

$50 billion in U.S. treasury bonds” (Huntington 28).

Eliminating this foreign debt would be another good step in

the right direction for the U.S. government.

The second obstacle is that the national debt is

troublesome. The national debt and interest payments mean

higher taxes. The interest on this debt is growing

everyday, and something needs to be done so taxes don’t keep

getting higher to pay for it. “Today, the government must

spend 40 cents of every personal income tax dollar to pay

interest on the national debt” (Ginsburgh 1). If 40 cents

doesn’t blow your mind, then maybe the billion dollar

figures will. “Gross interest on the debt will continue to

rise substantially over the next 5 years from $360 billion

in 1997, to $412 billion by 2002, and by 2007 just the

interest on the debt is projected to be $483 billion This

$493 billion is just $50 billion shy of our entire

discretionary budget for the current fiscal year” (Hatch

S1152-1187). These numbers are unimaginable for most U.S.

families. You may wonder how does something like this even

begin to happen. Let’s break it down even more. The U.S.

national debt stands at over $5 trillion dollars, and that

translates into over $19,000 for every man, every woman, and

every child in America. The debt of an average family is

more than $72,000. That is more than the average family

income in America. You think its bad on family, what about

the young minds of American bringing us into the 21st

century? “For many young adults who are taking advantage of

student loans to obtain a better education, the national

debt can ring up $2,200 in additional costs on that loan”

(Hutchinson S985-988). The elected officials in office need

to focus harder on these topics and quit shoving them out

the back door of the capital.

Even worse, the demographics of the U.S. are changing

drastically. People are living longer, putting an even

larger burden on the entitlements. Along with this, the

number of working taxpayers will decline when the ‘baby

boomers’ reach retirement. This will mean fewer revenues

for the government, making the situation worse. Something

has to be done to fix the budget problem, or future

generations will have the problem that they did not create.

Argument 3: A balanced budget would benefit the United

States by providing extra funds for social programs, tax

cuts, and reducing the national debt

A balanced budget is essential for the future well

being of our country. Currently, individuals within our

country are realizing that without some sort of economic

action social programs like Social Security will have to be

shut down, taxes will have to be raised to outrageous

amounts, and the national debt, including interest

payments, will suck our budget dry. The most viable option

to preventing these problems is balancing the budget.

Social Security and other social programs seem to be

increasingly at risk with the aging population of the United

States. Currently Social Security and Medicare combined make

up 32.5% of the Total Federal Outlays (Congressional

Research Service 1). This already large number is expected

to increase when baby boomers seek retirement. Without a

balanced budget, the baby boomers could cause serious

problems. Estimates show that to provide for the baby

boomers through these programs, the government “would have

to raise [taxes] by about 50% to raise enough money”

(Krugman 94). Clearly, this is an alternative that the

government does not want to take, and, thanks to a balanced

budget, it won’t have too. Our recent balanced budget has

even lead to a surplus with provides an amount of extra

funds that can be used to help programs such as these. Even

without a budget surplus, a regular balance would have the

same effect because the government will reduce its national

debt, which means fewer interest payments and therefore

means more money to spend on these programs without having

to tax the American people more.

The national debt in itself is a large problem, as seen

in the previous argument. In addition to harming our

society by placing larger tax burdens on Americans, the

interest payments on the national debt take money and

resources away from other areas. Many argue that “the best

way to safeguard Social Security is to apply all of the

surplus to paying down the national debt. Such an approach

would shrivel the government’s interest costs which are

currently one seventh of all spending and potentially leave

enough money in the overall budget to cover the gap between

Social Security costs and payroll tax receipts for decades,

according to administration projections” (Brownstein 1).

When the government has run a debt so large that it spends

an enormous amount of money on interest alone, it is wise

policy to want to eliminate that financial burden and

allocate the money to more beneficial projects. Because the

government can balance its budget with no negative

consequences, it should seek to do it. After all, the

benefits are a necessity for the economic survival of our

country in the future.

Balancing the budget also prevents a need for the

government to tax Americans more. With a budget deficit,

the government may have to seek more money from its people

in order to fund its budget; however, with a balanced

budget, this is not necessary. First of all, taxes are

already very high on Americans, and therefore, any policy

that might lower taxes would be beneficial. According to a

Tax Foundation study, “State and local taxes claimed an

astonishing 38.2 percent of the income of a median

two-income family making $55,000 up from 37.3% in

1996 Federal taxed under President Clinton consumed 20

percent of America’s entire gross domestic product in

1997 The average American family today spends more on taxes

than it does on food, clothing, and housing combined” (Grams

S882-884). With taxes already this high, the government

ought to try to lower the tax burden on the public. By

creating a balanced budget, the government can work toward

reducing the national debt which will lower the amount of

money paid on interest, which will lower the amount of money

the government needs to collect through taxes.

In conclusion, the budget deficit causes harmful

problems, such as an additional trade deficit and a large

national debt, that need to be reduced. In addition, a

balanced budget would help failing social programs and

alleviate the tax burden place on U.S. citizens but creating

a surplus and lowering the national debt. It is also very

feasible for the government to take this course of action

because, with the increased tax revenues, the government can

balance its budget without raising taxes and/or cut

government spending.

Works Cited

Bartlett,Bruce. “Bartlett’s Notations: Having Budget

Surplus May Enhance Growth.” Detroit News, 2 Mar 1998,

p.6

Bartlett,Bruce. “Bartlett’s Notations: New Budget

Challenge: Keeping Books Balanced.” Detroit News,

19 Jan 1998, p.8

Brownstien, Ronald. U.S. News and World Report. 23 Mar

1998. P 1.

Congressional Research Service, Entitlements: Brief

Descriptions of Largest Programs, 17 Feb 1994.

Ginsburgh, Justin. On-Line. Available

[http://www.enteract.com/ jgins/budget.htm]

Grams, Rod. “Why We Must Return Any Budget Surplus to the

Taxpayers.” Congressional Record. Daily ed. 24 Feb,

1998, p. S882-884.

Hatch, Orrin G. “Balanced Budget Amendment to the

Constitution.” Congressional Record. Daily ed. 10 Feb

1997, p. S1152-1187.

Huntington, Samuel P. “The Erosion of American National

Interests.” Foreign Affairs. Sept-Oct 1997, p.28-49.

Hutchinson, Kay Bailey. “The Budget.” Congressional

Record. Daily ed. 5 Feb 1997, p. S985-988.

Koretz, Gene. “Economic Trends.” Business Week. 19 Jan

1998, p. 1.

Krugman, Paul. The Age of Diminished Expectations. The MIT

Press, Cambridge, Massachusetts, 1997.