Happy new fiscal year(Fiscal year of 2011 started at the second day of the presentation)!
There is no doubt that US now is in a bad position in many ways many people don’t want or would never expect to be. Huge amount of the deficit is a big reminding right here waiting for a solution.
Social security, Medicare and Medicaid, defense and Non-defense are the four components of the government outlays. In FY 2010, the number of the four are coincidentally to be an average of 700 billion dollars with a total of 3.49 trillion compared to 2.14 trillion in revenue which comes from different sources of taxes. As Percentage of U.S. Economy, the federal spending in 1800 was only 2%, while in 2009, the number is 24%, and we predict the number in 2040 to be 35%. Especially the interest which is part of the non-defense component is flying under the radar but maintains a big base and a high increase rate, which contributes a lot to the big federal spending but not causing enough attention.
“Since 1800, U.S. Debt Held by the Public has exceeded 60 percent of GDP (the maximum debt ceiling used by the European Monetary Union) only during World War II.” But US holds 40% of the world economy since then, the dollars are as good as gold. Then the government starts to rely on the big deficit. Let the foreign government to hold debt to the US is not necessary a bad thing, but we should consider the sustainability of the gap between spending and revenue and the percentage to the GDP. The average outlays as a percent of GDP is 21 while the revenue to be 18.3, which left a 3% gap in deficit in GDP which brings concerns whether the economy is sustainable at such level. However some people argue that the GDP has an average growth rate of 3% every year, it should be OK and sustainable to the economy. But in a long-term structure stand point, we can see that is not working. “Without reforms, by 2022, future revenues will only cover Social Security, Medicare, Medicaid, and interest on the debt. By 2046, revenues won’t even cover interest costs.” And future U.S. Debt Held by the Public is projected to soar if current policies remain unchanged, which means in 2038, US government will hold almost 300% of the debt as a percentage of GDP, and 854% in 2080.
In another aspect, the Mandatory spending is consuming a growing share of the budget which means that the Congress will have less control of the budget. It will be a very negative impact on the wise spending the tax payers’ money.
In another inception, the Social Security program has experienced more surpluses than deficits. We expected in the future, persistent cash deficits are projected for Social Security. Social security has current beneficiaries of 53 million dollars and Medicare has about 46 million but the trust fund will begin permanently operating with a negative cash sin 2015 for Social security and Medicare has already begun. The exhaustion year of those funds are not far away, respectively to be 2037 and 2029.
We know the tax will increase. Total tax burdens are lower in the U.S. than many other industrial countries, 28% compared to Sweden 48%, France 43%. Individual income and payroll taxes comprise most of federal receipts Main sources of growth in the Federal revenue over the next 30 years will be individual income taxes, about 6.5% which has to cover the 6.5% increase in Interest alone and almost 4% growth in Medicare and not to mention Medicaid and social security.
No comments:
Post a Comment