The Federal Budget Spending: U.S. Debt

Federal budget spending, national debt, and deficit can all be linked to the United States debt clock. These terms are all interrelated due the U.S. national debt. The outstanding public debt as of October 28, 2008 is approximately $10,530,518,090,220.69 total. That would mean that each person in the U.S. has contributed 35-thousand dollars each. How can we approach the vast accumulation of the countries past debt, will that affect the individuals in the economy when policies are liberally taken in and out of the structure, how will we be able to find out what policies have been helping or hurting the economy if the policies are being changed as quickly as they are?

A few economists think that debt is good for the economy, and other economists don't. There is actually no general statement regarding whether or not debt is good or bad for the economy because nobody actually knows. As of the year 2008 the economy's debt has reached an outstanding number and still growing no matter what political party is in office. The federal government's deficit spending is a lifestyle and unfortunately an ongoing tradition. The elected officials that have taken office have not designed a program that would minimize the federal budget expenditures with its incoming revenues. Although the constitution does not require the United States to pass a balanced budget there is a constant flux between deficit spending and balancing the budget no one knows which option will allow the economy to flourish stably.

The last time the federal budget was brought into balance was the year 1969, and before that it was 1960. Clinton proposed and presented a balanced federal budget to congress in 1998 but nobody has taken action since, and questions on what policies are going to correct the deficit are at a standstill. The deficit in and of itself intricately affects everybody in the long run and short run whether there is a surplus, high deficit or a low deficit. The federal budget and the economy are reciprocally connected when the economy grows and how resources are collected. We need policies that will get the economy where we want it. What is debt and why is effecting and why will does it affect our nation?

Debt is anything that is owed and can be acquired in various ways. There are three types of debt, national debt, public debt, and intra-government debt. Public debt is the portion of the national debt help by the public. Public debt also has the most impact on the economy, so economists pay more attention to it than the rest. National debt is the portion of the national debt held by government agencies. National debt or gross federal debt should be distinguished from public debt (Moomaw, Olsen 373). National debt would than include public debt and debt that federal agencies owe other federal agencies. Intra-governmental debt is the portion of the national debt held by government agencies. The United States for instance has been able to gather debt with the compliments of war, natural disaster, frivolous spending, and not finding a way to bring spending under control. Revenue is obtained by the government through taxes, fees, and fines. After money is added in it should balance out with the governments projected spending, but it has yet to work out for the economy right now. This is what it known as defivit spending and has been coined as national debt (Johnson, Shmuel).

After we were attacked by al-Qaeda on 9/11 our nation prepared for war. The war initiated soon after the attack from the terrorists. The approximate spending for this war is about seventy billion dollars on related war spending. The war is one of the major hits that hurting our economy because we are still funding money to have our troops over-seas. It is good that we are defending our nation, but there should have been a better more modified layout on how much we should spend on this war. Sending our troops overseas is pricy along with the war, and what about the reason we got into war. The two towers that were destroyed are in the midsts of being re-built. The new world trade center will cost three-hundred-fifty million dollars. The amount of money that has been put into cleaning up and re-building the twin towers is extraordinary (Johnson, Shmuel).

Natural disasters have also played a big part in our deficit because every single time the United States is hit by hurricane, tornado or a damaging floor it could cost the government billions of dollars to help re-build the area that has been destroyed because of a natural disaster. Hurricane Katrina for instance is costing tax payers at least two-hundred billion dollars. That even exceeds the amount that is being put into the war in Iraq (Paul). If you really think about it Hurricane Katrina will cost tax payers a lot more than just two-hundred billion because it will take a long time to restore the city to its original state. It has also been able to expose how bad welfare policies are being handled. As soon as Hurricane Katrina hit congress gave sixty billion to its restoration without even thinking about a budget plan. It is tragedy that all of these people lost their homes and lives but just throwing money out there is not going to help the community to re-build faster if there is no budget plan (Paul).

As seen there needs to be a budget plan for everything no matter what the situation is. There needs to be a plan so that the money can be used appropriately in an efficient manner. Fiscal policy in the short run would generally be a good thing because of the increase in spending. Government spending is known to have the 'multiplier effect.' For example, when the Government puts money into the economy individuals would then spend an extra dollar. If the Government decides to reduce spending and not spend that extra dollar then the individuals that would have provided goods and services for that dollar would not. That would lead to a decline in output initiating a cut in public spending. Economists view that the government cannot always stimulate the size of the economy by just deciding to increase their spending a little or cutting taxes (Moomaw, Olsen 372-375).

Fiscal Policy in the long run. A constant deficit or surplus, but itself, is believed to have little if any effect on the short run rate of economic growth. It is changes in the surplus that matter for short run growth. However, whether the budget is in surplus or not does have consequences for the composition of economic output, and that can have an effect on growth in

the long run (Cashell).

Growth in the long run has three key factors: labor force growth, how fast technology is growing, and how much capital is available for the workforce. The last one is the most susceptible to policy makers (Cashell). Policies that are being established for the United States have a lot to do with our economy because there is no policy that is set in stone. We need to be able to have a policy that will guide our decisions and have a positive output on the economy. It is easy to talk about a policy that will make the economy fruitful, but it can not be that easy because no body has been able to establish a policy like that. There are still problems with Social Security, Medicare, and Medicaid that is a big part of financial crisis right now. The unsustainable path that we are already on will dramatically increase as soon as the baby boomer generation starts to retire and leave the work force. If we eliminated the problem of Social Security it would be a little bit better, but what would eliminate an effective amount is if the Medicare and Medicaid imbalances were fixed (Moomaw, Olsen 387).

The United States faces huge fiscal challenges. The economy is not doing as well as it could with our very visible financial crises. This year alone we had Fannie May and Freddie Mac costing tax payers billions with their bankruptcy. Gas prices have been fluctuating dramatically but prices have been going up for a long time now reaching five dollars a gallon or more in some places. These are things that have been rolling in the wrong direction for a significant amount of time now but no one ever takes action until something terrible happens which is a bad thing. The United States should be prepared for any kind of financial crises before it happens. If an appropriate budget plan, and organization takes place we would not be in such a rut. Every state should have a plan for the worst, god for bid that it happens, but it is better to be prepared for the worst than to scramble when an unfortunate outcome happens. Throwing money at the situation will not help. It is like technology; a company can have the latest and greatest piece of technology but not gain anything if they do not use it appropriately. For instance, the United States is a company and should use their technology to its greatest degree to reach maximum output.

It would take awhile to fix the economy, just like everything else it would take time. If we start now the economy will at one point reach a balanced budget and be prepared for everything. The states should each turn a disaster crises sheet every year with the entire set negative outcomes and the amount of money that they need to save for it along with a financial plan that divides the money into sections. If nothing happens for a long time then they would put money towards other things like school, hungry children, and help out in the areas in the state that need improvement. There is no harm in having a plan, and there is no harm in having extra money. This goes for Social Security as well, individuals need to learn how to take care of their own money and realize that Social Security was never meant to be a retirement plan.

In conclusion the economy has a long way to go and there has to be a president in office that will be able to see the cycle of problems. Our nation can reach economic stability if the cards are played right. The general public has to understand that it will not happen right away, and than the government won't feel the pressure to generate short-run outcomes so that the public can feel stable for a few months, it takes time.

Works Cited

"70 Billion in War Related Spending ." 2007. 28 Oct 2008.

Cashell, Brian W. . "Who are the Middle Class." CRS Report for Congress 2007 1-6. 28 Oct 2008.

Johnson, David; Shmuel Ross. "World Trade Center." 2007. 28 Oct 2008.

Moomaw, Ronald L.; Olsen Kent W. Economics & Contemporary Issues. 7th. Canada: Thomson South-Western, 2007.

Paul, Ron. "Deficit Spending for Katrina." 2005. 28 Oct 2008.