First Round of Deficit Cuts

           As of 2008, the United States economy has taken a turn for the worst. The economy has slipped into recession due to the repeal of the Glass Steagall Act, falling interest rates, and the housing market bubble. With that being said, the current public outstanding debt for the US is a little over sixteen trillion. President Obama, newly re-elected, has begun making attempts at a new deficit reduction program. Before this new plan can be implemented, it needs to be approved. The first step, currently being discussed, is the down payment.

            As we learned in class, implementing fiscal policy the correct way can indeed deduce deficits. One way to do so would by cutting spending and increasing taxes. That is exactly what President Obama wishes to do in his new deficit reduction plan. Currently his efforts are going towards getting congress to approve “a first installment on deficit reduction that would replace the automatic spending cuts and tax increases that make up the fiscal cliff” (Weisman, 1). In order to start reducing the deficit, Washington needs to get the fiscal house in order to display the severity of the situation. If an initial down payment were made, comprised of mostly increased taxes and top incomes, it would signify a legitimate movement to reducing the deficit over time. The ultimate problem with this situation is getting congress to approve these actions. Republicans in the house are apposed to this large initial down payment because they believe that the payment should be made up of Medicare savings and other entitlements. They also fear that the promises of future spending cuts are too vague and will not get accomplished. The loner this process takes to the closer our country gets to the approaching fiscal cliff.

            An agreement needs to be made soon in efforts to keep the public on board with the task of reducing the deficit. “Republicans and Democrats alike worry that canceling roughly $600 billion in deficit-reducing tax increases and spending cuts next year might spook financial markets, which could take the move as proof that the United States’ fiscal problems are politically intractable” (Weisman, 1). The fiscal deadline is now four weeks away and a decision needs to be made either way. As we discussed the annual congressional budget office’s report, it is apparent that there are many different approaches to this large-scale problem. I believe that President Obama’s initial strategy is the correct one. He is urging that a large initial down payment needs to be approved to at least start tackling the deficit. He believes that implementing this strategy will “lock in $1.6 trillion in higher revenue as the bulk of the first stage of deficit reductions before stage two even begins” (Weisman, 1).

            With the deadline approaching, Congress needs to start making agreements. President Obama has a plan that will work, if put into action. Simply arguing over the same issues is only prolonging the problem, if not adding to it everyday. “Mr. Obama’s initial proffer contained just two numbers for stage two: $1.6 trillion, the amount of new revenue a simplified tax code should raise over 10 years; and $400 billion, the savings that changes to Medicare and other entitlements should yield” (Weisman, 1). Although there are many other strategies that could also be implemented in regards to handling the deficit, one has yet to be approved and is ultimately hurting our economy further. In my opinion, our country has been ‘talking’ about solving this problem for quite some time now and needs to start producing.