Why is the US in debt? An analysis of US spending

The United States federal government should recover from debt by first limiting spending, reevaluating government fund accounting, cutting back on public health programs, and restructuring congress to make it less susceptible to lobbying.

“Just because it makes money doesn’t mean it’s good for business. Like all of you, I believe in free trade.  But we have to acknowledge that for millions of Americans, its burdens outweigh its benefits.” Obama, 2008. When our political leaders make comments such as this one, where do you THINK the budget is going? The budget is a crucial and inherent problem (for more on the budget, see my post here: second paragraph), complete with built in harms and promises of greater devastation if it is not addressed. In order to solve this problem, I am advocating the switch from government fund accounting to one that has rewards for efficiency, the cut backs of all government sponsored health programs, requiring the GAO to sign off on any committee budget proposals, and, to check if any of this has an effect, the introduction of the private sector method of calculating debts.

The problem of the budget can no longer be ignored. At this point, as the Financial Report of the United States Government freely admits, the gap between the government’s promised obligations, including Medicaid, Medicare, and Social Security, and the money that the government has available, is 45 trillion dollars. To give you some comparison, the annual GDP for this year is approximately 14 trillion. Essentially, the government owes over 3 times as much money as the economy is worth. (Legitimized by the GAO) This obvious problem is NOT going to go away on its own, over even with a simple cut in spending. Here’s why.

Many love to blame the budget deficit on the war in Iraq. However, all government discretionary spending combined, including national defense, homeland security, mass transit systems, foreign aid, and Supplemental Security Income, is substantially less than the combined costs of Medicare, Medicaid , and Social Security. Even if Social Security were the ONLY government program, our country would still be in debt, seeing as within 20 years the system with run ANNUAL deficits of 30 trillion dollars. So to solve this problem, more has to be done than something as simple as pulling out of Iraq. This is because, while the government has a spending problem, they have a much larger structural problem. Structural problems do not fix themselves. Furthermore, if this problem is ignored, within the next 30 years taxes will either have to be raised 60% or the federal budget cut by ONE THIRD in order to get out of debt. (GAO)

So the longer we wait, the worse this inherent problem gets. The next objective would be solving the problem. The current method of government fund accounting annually allocates a set amount of money to each of the eligible organizations. If the money is spent at the end of the year, the government gives them more money to continue running. If the money is not completely spent, then the organization gets absolutely nothing. So, if the organization wants to get any money at all for their next fiscal year, they have to spend every penny of their year’s allocation. (www.remond.com, www.usasearch.gov) To deal with extra money, corporations come up with clever solution. One year, UNC chose to buy hundreds of crates of toilet paper to eat up their extra money, and the pentagon chose to buy hundreds of crates of 500 dollar obsolete hammers. (www.cato.org) To prevent things like this from happening, the government needs to switch to a system that rewards extra allocation instead of punishing it. Letting the organizations keep their surplus and also giving them their next year’s allocation would work just fine, as this system would reward efficiency instead of punishing it.

The next necessary measure is to find a way to either curtail lobbying, or reduce its influence on Congress. Lobbying makes it impossible to cut wasteful spending programs. In his book, The Future of Freedom, Fareed Zakaria points out that people who care the most about something contact their representatives and pay for lobbyists. “There are only 25,000 cotton growers in the United States, with an average net worth of $800,000. They receive $2 billion in government subsidies.” This happens because, “If a group of 100 farmers got together to petition the government to give them $10 million, the benefit to each farmer is 100,000. The cost to the rest of the country is about 4 cents per person. Who is more likely to form a lobby, them or us? Multiply this example by thousands and you understand the central problem of American democracy today.

Another, highly unpopular measure, needed to fix the budget, is to cut back government funded health programs. The costs for them are rising at an alarming rate, and if they continue to do so the system will be forced to morph into one like that of England to stop from sinking entirely. This wouldn’t be so bad, except people in England are still pulling out their own teeth because of lack of both public and private, as private practices are illegal, health coverage. (NY times) In America, the GAO already sees this coming, but the GAO has no political voice.

The way the budget is set up now, the president prepares a budget request which congress votes on. The budget resolution is the passed to a committee who decides if the funds should be distributed. The amount of money that the budget calls for is then compared with the amount of money available. If there isn’t enough, taxes are raised, or the government sinks further into debt. I propose that the GAO review the budget after the committees are done with it and determine whether they think it is possible to procure the funds without bankrupting the country in the near future. If it isn’t, the budget should be cut, unless the president declares a state of emergency. This should at least curb the national spending by introducing a third party that has already shown itself to be reliable.

Finally, to see if any of this has any effect, the government should use the same method that the private sectors use to calculate their deficit, that is by subtracting the money when they promise it to something else, instead of when they actually hand it over. This would prevent the government from cutting their spending numbers in half by reporting their losses before they pay everything they own. This would check to see how much of an effect the system is having.

If America takes all of these steps: recognizes the problem, fixes governmental fund accounting, curtails Social Security and lobbying, and asks the GAO to help with the budget, America would be headed in the right direction. And then, someday in the future, we might well own our country again.

 

 

 

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4 Responses to Why is the US in debt? An analysis of US spending

  1. Ohnoepatrol (You know, that 9th grader...) says:

    Last time I checked, The department of defense was just as big as social security and Medicaid, though not combined, and was increasing its budget 7 percent a year. Though yes, it is not as big of a problem as those other two, it should still be considered. It accounts for 20% of the government’s spending. Medicaid and Social security both account for 21% each.

    I know, army is important, but seriously, do we need to spend THAT much on it?

    I account this massive debt on George Bush’s unfathomable stupidity.

  2. Marina Lee says:

    I’m going to take the liberty of quoting myself: “In short, the United States budget allows for more spending than intake. This has been the case since 2002, and before that from 1970-1997. ” So the debt has been building for years and years, and before that, for many more years. Can’t quite be the fault of George W. or even George W and his father. I’m also going to add that Medicaid isn’t a large part of the problem. Social Security is, as it was designed to pay for itself. The army, while it may be a problem, is not as big of one as Social Security, and neither of those two things are as big of a problem as the subsidies and government fund accounting, because those cause a whole bunch of small losses which add up. Also, those are problems with the essential benefits offered for wasting money. The government needs to stop rewarding people who waste money, and once they do that, they can start cutting back in other areas.

  3. ohnoepatrol says:

    I’m not questioning the fact that there was a debt under Clinton. I’m just curious as to what exactly Bush did to make the debt skyrocket from around 5.8 trillion to 9.6 trillion.

  4. […] or Us? If you read one of my earlier posts on why the US is in debt, you may recall the block of bolded text in which Zakaria explained the reasons why it is so easy […]

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