One of the many indicators of an economy's health is the state of it's government debt. This is unfortunate, since the United States is currently facing a deficit of almost $10 Trillion. This problem has been a key talking point in the 2012 Republican debates and this past summer forced the government to a last minute budget deal that led to a decrease in our national credit store.
As part of the last minute deal, in order to appease both the left and right wing, a provision was instituted that requires a group of 12 bi-partisan congressmen called the Joint Selection Committee and widely referred to as the Budget Super-Committee are required to find between $1.5 and $1.2 trillion dollars in spending cuts by November 23rd or larger spending cuts will automatically take place from programs that both parties would want to protect. The terms of the bill require the committee to continue making cuts in December as well, but these first sets of cuts are important in all respects. From a political standpoint, neither party wants the 6 congressmen they each appointed to cave on any issues. Democrats will not want to accept any cuts to the entitlement programs that are a foundation of their platforms, such as Medicare and Social Security. At the same time, Republicans will refuse any attempt to raise taxes or eliminate tax cuts.
The lack of any progress can be concerning in many ways. For one, the gridlock in Washington led to this initial compromise in the first place. Rather than choosing to make large and effective spending cuts right away, the Congress chose to push back their decision, leading to a lowering of the US credit rate and causing further uncertainty in the markets. A strong initial spending cut of $2 to $4 trillion in the summer would have helped convinced investors that we are approaching the deficit immediately and effectively. By pushing back the cuts until now, Congress looks more like kids procrastinating doing their homework than a group of policy actors approaching important problems.
In order to make a major and effective dent in the deficit, Congress should have committed to larger spending cuts, which would create a greater sense of security in the market. Larger spending cuts now to programs that will increase our deficit in the future would also provide for better economic growth on the long run, and allow for continued spending now on infrastructure and other stimulus to help create more jobs and lower our unemployment.
A lot is resting on the shoulders of this "Super Committee", including the long term success of our government and the growth of our struggling economy.
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