Balanced Budget Essay, Research Paper
Balanced Budget
Thomas Jefferson stated, “I place economy among the
first and most important virtues, and public debt as the
greatest of dangers. To preserve our independence, we must
not let our rulers load us with perpetual debt” (Grinsburg
1). This quote illustrates the importance of maintaining a
balanced budget; therefore, it is necessary to stand firmly
resolved that the government should balance its budget.
Three main arguments uphold this premise. They are as
follows: 1. It is feasible for the government to balance the
budget, 2. A budget deficit harms the United States through
creating a trade deficit and increasing the national debt,
3. A balanced budget would benefit the United States by
providing extra funds for social programs, tax cuts, and
reducing the national debt.
Argument 1: It is feasible for the government to balance its
budget
On of January 7, 1998, the U.S. Congressional Budget
Office released a budget forecast that “shows the federal
budget to be in effective balance, with a projected deficit
of just $5 billion this year a trivial percentage of an
estimated $8.5 trillion gross domestic product” (Bartlett
8). The government was able to balance the budget without
causing negative complications. This balance came absent of
any significant tax increases and/or government cuts in
spending. Because the United State’s economy has been
relatively productive in the past few years, the government
was able to balance the budget through an increase in tax
revenues. During this time the government was actually able
to increase its spending somewhat, while the American people
were free from additional tax burdens. In fact, according
to the U.S. Treasury Department, “federal revenues are up
10.5% over the same period a year earlier, while spending is
up only 3.8%” (Bartlett 6). Essentially, this shows that it
is not only possible for the government to balance its
budget, but it can also be done without negative
consequences. Maintaining a budget deficit, on the other
hand, drastically hurts the stability of the U.S. economy.
Argument 2: A budget deficit harms the United States through
creating a trade deficit and increasing the national debt
Almost everyday on the news one hears something about
the Federal deficit and the U.S. budget problems. Currently,
the Federal deficit is over five trillion dollars, and that
divided out among the U.S. population equals over nineteen
thousand dollars per person. This enormous debt couldn’t
have been created overnight. The government’s failure to
balance the budget resulted in both the large trade deficit
and large national debt.
First, the government needs to focus on the trade
deficit. Lowering the budget deficit will help the American
public with national savings which, in the long run, will
rescue the trade deficit. “The ballooning federal deficit
had cut national savings far below the nations investment
needs. As a result, the U.S. had to import capital from
overseas, which inevitably resulted in a trade deficit”
(Koretz 1). The main point of all this is that private
savings is down, and needs to be brought back up. “Thus,
while the public sector’s saving performance has improved
mightily in recent years, America’s household savings rate
has plummeted to its lowest level in 39 years leaving the
U.S. still highly dependent on foreign capital (Koretz 1).
Another key point to this issue is high foreign debt. By
1997, the U.S.’s “net foreign debt was more than 1 trillion
and was increasing at an annual rate of 15 to 20 percent,
with Japan owning almost $300 billion and China more than
$50 billion in U.S. treasury bonds” (Huntington 28).
Eliminating this foreign debt would be another good step in
the right direction for the U.S. government.
The second obstacle is that the national debt is
troublesome. The national debt and interest payments mean
higher taxes. The interest on this debt is growing
everyday, and something needs to be done so taxes don’t keep
getting higher to pay for it. “Today, the government must
spend 40 cents of every personal income tax dollar to pay
interest on the national debt” (Ginsburgh 1). If 40 cents
doesn’t blow your mind, then maybe the billion dollar
figures will. “Gross interest on the debt will continue to
rise substantially over the next 5 years from $360 billion
in 1997, to $412 billion by 2002, and by 2007 just the
interest on the debt is projected to be $483 billion This
$493 billion is just $50 billion shy of our entire
discretionary budget for the current fiscal year” (Hatch
S1152-1187). These numbers are unimaginable for most U.S.
families. You may wonder how does something like this even
begin to happen. Let’s break it down even more. The U.S.
national debt stands at over $5 trillion dollars, and that
translates into over $19,000 for every man, every woman, and
every child in America. The debt of an average family is
more than $72,000. That is more than the average family
income in America. You think its bad on family, what about
the young minds of American bringing us into the 21st
century? “For many young adults who are taking advantage of
student loans to obtain a better education, the national
debt can ring up $2,200 in additional costs on that loan”
(Hutchinson S985-988). The elected officials in office need
to focus harder on these topics and quit shoving them out
the back door of the capital.
Even worse, the demographics of the U.S. are changing
drastically. People are living longer, putting an even
larger burden on the entitlements. Along with this, the
number of working taxpayers will decline when the ‘baby
boomers’ reach retirement. This will mean fewer revenues
for the government, making the situation worse. Something
has to be done to fix the budget problem, or future
generations will have the problem that they did not create.
Argument 3: A balanced budget would benefit the United
States by providing extra funds for social programs, tax
cuts, and reducing the national debt
A balanced budget is essential for the future well
being of our country. Currently, individuals within our
country are realizing that without some sort of economic
action social programs like Social Security will have to be
shut down, taxes will have to be raised to outrageous
amounts, and the national debt, including interest
payments, will suck our budget dry. The most viable option
to preventing these problems is balancing the budget.
Social Security and other social programs seem to be
increasingly at risk with the aging population of the United
States. Currently Social Security and Medicare combined make
up 32.5% of the Total Federal Outlays (Congressional
Research Service 1). This already large number is expected
to increase when baby boomers seek retirement. Without a
balanced budget, the baby boomers could cause serious
problems. Estimates show that to provide for the baby
boomers through these programs, the government “would have
to raise [taxes] by about 50% to raise enough money”
(Krugman 94). Clearly, this is an alternative that the
government does not want to take, and, thanks to a balanced
budget, it won’t have too. Our recent balanced budget has
even lead to a surplus with provides an amount of extra
funds that can be used to help programs such as these. Even
without a budget surplus, a regular balance would have the
same effect because the government will reduce its national
debt, which means fewer interest payments and therefore
means more money to spend on these programs without having
to tax the American people more.
The national debt in itself is a large problem, as seen
in the previous argument. In addition to harming our
society by placing larger tax burdens on Americans, the
interest payments on the national debt take money and
resources away from other areas. Many argue that “the best
way to safeguard Social Security is to apply all of the
surplus to paying down the national debt. Such an approach
would shrivel the government’s interest costs which are
currently one seventh of all spending and potentially leave
enough money in the overall budget to cover the gap between
Social Security costs and payroll tax receipts for decades,
according to administration projections” (Brownstein 1).
When the government has run a debt so large that it spends
an enormous amount of money on interest alone, it is wise
policy to want to eliminate that financial burden and
allocate the money to more beneficial projects. Because the
government can balance its budget with no negative
consequences, it should seek to do it. After all, the
benefits are a necessity for the economic survival of our
country in the future.
Balancing the budget also prevents a need for the
government to tax Americans more. With a budget deficit,
the government may have to seek more money from its people
in order to fund its budget; however, with a balanced
budget, this is not necessary. First of all, taxes are
already very high on Americans, and therefore, any policy
that might lower taxes would be beneficial. According to a
Tax Foundation study, “State and local taxes claimed an
astonishing 38.2 percent of the income of a median
two-income family making $55,000 up from 37.3% in
1996 Federal taxed under President Clinton consumed 20
percent of America’s entire gross domestic product in
1997 The average American family today spends more on taxes
than it does on food, clothing, and housing combined” (Grams
S882-884). With taxes already this high, the government
ought to try to lower the tax burden on the public. By
creating a balanced budget, the government can work toward
reducing the national debt which will lower the amount of
money paid on interest, which will lower the amount of money
the government needs to collect through taxes.
In conclusion, the budget deficit causes harmful
problems, such as an additional trade deficit and a large
national debt, that need to be reduced. In addition, a
balanced budget would help failing social programs and
alleviate the tax burden place on U.S. citizens but creating
a surplus and lowering the national debt. It is also very
feasible for the government to take this course of action
because, with the increased tax revenues, the government can
balance its budget without raising taxes and/or cut
government spending.
Works Cited
Bartlett,Bruce. “Bartlett’s Notations: Having Budget
Surplus May Enhance Growth.” Detroit News, 2 Mar 1998,
p.6
Bartlett,Bruce. “Bartlett’s Notations: New Budget
Challenge: Keeping Books Balanced.” Detroit News,
19 Jan 1998, p.8
Brownstien, Ronald. U.S. News and World Report. 23 Mar
1998. P 1.
Congressional Research Service, Entitlements: Brief
Descriptions of Largest Programs, 17 Feb 1994.
Ginsburgh, Justin. On-Line. Available
[http://www.enteract.com/ jgins/budget.htm]
Grams, Rod. “Why We Must Return Any Budget Surplus to the
Taxpayers.” Congressional Record. Daily ed. 24 Feb,
1998, p. S882-884.
Hatch, Orrin G. “Balanced Budget Amendment to the
Constitution.” Congressional Record. Daily ed. 10 Feb
1997, p. S1152-1187.
Huntington, Samuel P. “The Erosion of American National
Interests.” Foreign Affairs. Sept-Oct 1997, p.28-49.
Hutchinson, Kay Bailey. “The Budget.” Congressional
Record. Daily ed. 5 Feb 1997, p. S985-988.
Koretz, Gene. “Economic Trends.” Business Week. 19 Jan
1998, p. 1.
Krugman, Paul. The Age of Diminished Expectations. The MIT
Press, Cambridge, Massachusetts, 1997.