CBS 2 School: Budget Basics

You had to know your GSL (Government as a Secondary Language) if you expected to understand the big budget news last week.

President Barack Obama’s bi-partisan national debt commission released its formal report suggesting ways to reduce the nation’s deficits and total debt. But the Commission also released news that its suggestions did not garner enough support to automatically move the proposals forward in the legislative process.

The Commission’s proposal dealt with five key budget basics:

Revenues—the taxes collected by the federal government that pay for government expenses.

Among the Commission’s proposals was a plan to simplify the U.S. tax code but eliminate popular incentives such as tax deductions for mortgage interest. The proposal also caught political flak for suggesting that top income earners should pay even more into the Social Security program.

Entitlement Spending—governmental expenses that are permanent and can only be changed with amendments to laws. Of the $3.5 trillion dollars that the federal government spends, more than $2 trillion is spent on entitlement spending.

Social Security is the government’s single most expensive program, and only getting more expensive with a larger pool of retirees who are living longer than ever. Among the Commission’s more controversial proposals was trying to save money by increasing the age (from 67 to 69) at which someone could receive full Social Security benefits.

Discretionary Spending—well less than ½ of the federal government’s expenses are costs that can be adjusted on an annual basis.

Defense spending takes up the lion’s share of this spending with more than $600 billion spent in this area for the 2010 fiscal year. The Commission recommended that discretionary spending be capped from 2012 through 2020. It also recommended that non-critical spending be cut in order to get spending more in control.

Deficit and Debt—our federal government has spent over a trillion dollars more than it takes in for revenues this year. With the accumulation of deficits during the last 40 years, our government as accrued more than $14 trillion in total debt during that time.

The Commission’s recommendations were meant to deliver a stark message about the importance and difficulty of cutting expenses while increasing revenues. If adopted fully, the Commission’s proposal could have resulted in cutting $4 trillion dollars in deficits by 2020. But with key lawmakers from both parties refusing to endorse the Commission’s deficit-cutting proposals, we’re back to hearing the same old message that GSL has delivered for nearly 50 years: let the next generation deal with it.

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  • "R dubs" Walker

    It seems to me that what needs to be done is cut spending. We have to stop increasing the debt and cutting out discretionary spending is the best way to do it. Call me an anti-patriot, but defense spending is what has to be cut. $600 billion is a lot of money, and I doubt that every last penny of this huge amount is necessary for our safety. Cutting social security would be great as well, but this is a risky cause for politicians to support (most of who are more concerned about re-election than economic stability). From my limited knowledge of economics, increasing government spending is the best way to get out of recession, but our current economic state has provided us with a unique, albeit undesirable situation. Though the economy is suffering, we have the ideal opportunity to resolve the debt issue as the economy is currently one of the primary focuses of our government. To me, resolving the debt issue now is like striving for economic stability in the future. The problem, of course, is the bureaucracy and party divisions in Washington. Ideally, our leaders can get past these tensions to help our nation recover, but that will never happen.

  • Jaime "Pinko" Cohen

    For me, the most common sense decision in balancing the federal budget deficit was to eliminate the Bush tax cuts on incomes over $250,000. (Sorry Mr. Conneen… actually, no I’m not). I believe that if someone is making over $250,000 a year, he or she can afford to give more of that to the government. I don’t think that the Bush tax cuts would provide any sort of “trickledown effect” that will benefit our economy; after all, even David Stockman, the architect of Reaganomics, has spoken out against the Bush tax cuts ( Besides, this is a tax on households; unlike businesses, families are not as likely to provide jobs and in other ways stimulate the economy. What’s more important – letting the uber-rich minority (keep in mind, this is only the top 2% of Americans) retain a larger portion of their money, or reducing the federal budget deficit? Call me a Socialist, but I vote for increasing taxes to benefit our national economy.

    Creating a national sales tax was the “unkindest cut of all.” After all, increasing taxes on all goods hurts the poor the most; they are the ones who must spend the greatest percentage of their income on necessary items, such as food and clothing. (Believe it or not, yachts and second houses are not “necessary items”). I can sort of see both sides of the issue; even though “nearly every other rich country” has a national sales tax, America is not quite like most other developed countries, in that our federal system grants states a great deal more autonomy than, say, the United Kingdom. (This time, I sincerely am sorry that I’m not in Comparative Gov, Mr. Conneen). I’m not enough of an economist (fortunately) to know whether other countries that impose a national sales tax also have individual states taxes. I can understand the resistance to paying taxes on everyday goods to both the state AND national government, but the good (in this case, $281 billion by 2030) outweighs the evil. Hopefully by increasing taxes on the rich, we’ll be able to extend unemployment benefits enough so that people won’t starve with the increased price of goods.

  • C.Raaum

    The most common sense decisions in the budget cuts were the earmarks. A lot of earmarks are for pretty outrageous things and don’t affect that many people. Also cutting farm subsidies was easy since farmers are able to make so much money without them now.

    Decisions that were harder were cuts in military spending. You never know when those weapon programs and military materials may be needed to put to use. It was also difficult to make a decision on cutting retirement benefits to veterans or not. Other difficult decisions were things such as Medicare and foreign aid. Both help a lot of people but also cost us a lot of money.

  • Grace Kapov

    The most common sense decision I made while balancing the budget was cutting government spending. Even though I feel that it is our job to help others countries that are in trouble, we need to fix our own economy first. Therefore, it makes sense to cut foreign aid in half. How are other countries supposed to depend on our support when we rely on other countries like China to support us economically? But, I think that a majority of money would be saved if we spent less on the military. It is important to have a strong military in order to protect the people, but it has gone too far. In his farewell address, President Dwight D. Eisenhower warned against the military-industrial complex. And did we listen to his advice? No. Instead, the percentage of the federal budget spent on the military has increased exponentially. Former President George W. Bush said that the “best way to revitalized the economy is war.” Yet, it is military spending that is spiraling the US deeper and deeper into debt.
    The most difficult decision I made while trying to balance the federal budget deficit was concerning Social Security. I could consider Social Security a very touchy subject with most Americans. I think we should get rid of it and people should be responsible for saving their own retirement money, But the problem is how we will get rid of it. Since 1945 when Theodore Roosevelt signed the Social Security Act, working adults have increased their personal retirement savings through Social Security taxes. The age was originally set at 65. In 2010, the age has been increased to 67 and there are rumors that the government considering getting rid of Social Security. I think that by increasing the age one receives Social Security to 68 or 70, we are getting closer to ultimately terminating Social Security. As much as I support this, I don’t want it to happen. It is not fair for adults to be taxed for Social Security and then not receive it once they retire. I think it’s safe to say, I am very conflicted.

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