The United States Budget

The United States budget and its continuing deficit has been one of the most persistent issues of recent years. The ideal of achieving a balance between expenditures and revenues has long been a political objective at the federal level, albeit an elusive one. The purpose of this paper will be to discuss the budget deficit, the history behind it, the legislative actions taken to deal with it and the associated problem and suggested solutions.

With the national debt hitting $3 trillion, the Bush administration claim the annual budget deficit will disappear by 1993 (Nasar, 1990, p. 61). But, while the deficit has been decreasing dramatically from its peak in 1966 and appears to be continuing this downward trend, the reality is that other interests will restrain the actions necessary to achieve a balanced budget.

Due largely to higher tax revenues from an expanding work force and a halt to the once exploding Pentagon budget, the federal government managed to keep the deficit down to $152 billion in the 1989-1990 budget (Redburn, 1990, p. 1). This figure represents about three percent of the U.S. economic output (the gross national product or GNP), down from a peak of 6.2 percent (p. 1). However, as the country enters an era of peace with the collapse of Communism, "the urge to splurge will become tough to contain, as demand builds for new projects like road repairs (Nasar, 1990, p. 61). History bears out this belief.

By 1797, the country already bad a national debt of

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e President would render it ineffective ("Balanced," 1989, p. 257). Those in favor of doing away with the national debt point out that for every $50 billion reduction in deficit, a one-point drop in a real interest rates would result (Beatty, 1990, p. 82). Such a reduction would also lower the trade deficit by $25 to $30 billion because the borrowing of foreign capital to finance the deficit would decrease. In addition, it would lover interest rates, thus increasing investment by $16 to $20 billion (Beatty, 1990, p. 82). They then argue that new investment would fuel economic growth which consequently would lover the payout for unemployment compensation, welfare and other costs inherent in a slow-moving economy. It is then envisioned that higher growth would help meet the interest payments on the national debt which in 1989 was $240.86 billion. This amount is more than what the government spent on any other program, including Social Security (Beatty, 1990, p. 82). With the new "peace initiative" the order of the day, it would seem logical to meet this reduction by cutting the Pentagon budget. However, the Bush administration faces stiff opposition as it attempts to do so for Congress will be fighting to save favorite we

Category: Government - T