14 February 2011
What Is The American Debt: Who Will Pay In 2012 Budget: Obama Makes The Wrong Choice
With a $10 trillion US government debt that continues to rise both
the Republicans and Democrats are debating how do we reduce the debt,
and who will pay? Every government has it’s choice, increase revenue
through taxes or cut government spending.
So it seems our democratic President, Barack Obama has heed the calls to reduce the deficit by slashing spending.
It seems the allure of tax increases are simply too politically sensitive as we approach next years Presidential elections.
With that said there are some rumors of a small number of tax hikes
but in the main it seems cuts to spending are the focus for the Obama
Its a swift shift in economic policy as in February 2010 Obama
announced his intention to raise a huge $1.9 trillion from increasing
taxes from high income earners, with an annual salary of over $200,000.
Since the midterm elections last year the call for budget cuts has struck through as a new political agenda emerges.
At first it seems that analysis should determine why debt continues
to rise so rapidly. With George Bush as President he was given a
mandate to increase to an absolute $6 trillion, a figure economists
considered manageable as government debt goes.
That debt was driven up by around $500 billion per year, until
today when the debt stands at $10 trillion. As a nation America
produced an estimated $14.72 in 2010, deriving it’s Gross Domestic
With the wars in Afghanistan, Iraq and after the Global
Financial Crisis debt surged. It was through through a massive
economic stimulus package that reduced the impact of the GFC, yet now
that spending has added significantly to the national debt.
Tomorrow Barack Obama will release details on his proposed new
budget for 2012. Low and behold savings of up to $1.7 trillion per year
will be made from cuts welfare, there we go slashed environmental
There will be a freeze on government employee salaries as well as a halving of the Home Energy Assistance project.
As America experiences one of it’s coldest winters, low income
earners received a subsidy through the Home Energy Assistance project to
ensure their homes could either be insulated, or they could access
affordable heat. Keep them cold, is that the thinking, maybe this will
help people to get out to work?
It seems the funding for community development projects will also
be severed. This was a program that syphoned Federal funding off to the
states to build the resilience of low income communities including
providing descent housing, opportunities to expand the economy of the
An astonishing 3.5 million people are homeless in America, 1% of
the population. Homelessness was one of the targets of the community
projects, shelters, food, and long term assistance to place people in
safe and secure housing. Getting homeless housing, well it seems,
that’s a project that must go!
$5 billion of the education department budget will be cut in the
coming budget, yet the most controversial of cuts will come to the Teach
For America program that shifted some of the nations best teachers into
low income schools.
It’s not as far as Obama could have gone given the House Budget
Committee Chairman recommended far steeper cuts into social security and
medicare including pressuring the administration to increase the
retirement age. For now, it seems that these recommendations have been
The message from Republicans, now in control of the Congress, is ‘cuts to Social Security’ that has been their catch cry.
Social security makes up the largest proportion of government
spending, pensions 15%, welfare, 11% and health 17% of government
expenditure. Such funding programs, targeting low income earners will
always be vulnerable when it comes to government policy changes.
For Obama its all about cutting the pain, cry commentators, that is
seems refers to the pain of a congress controlled by the republicans,
not the cry of the homeless, poor and next year cold Americans.
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