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The BBC has an excellent article which shows just how truly incompetent the Bush Administration and the Republicans in Congress have been at managing our nation's finances. It is a truly informative & objective read which shows how deep of a hole Republicans have put the United States into.
Much has been made of Bush's proposed cuts to the federal budget but the Washington based Economic Policy Institute (which is a nonpartisan group for sound budget policy which has been critical of Bush's deficits in the past) has conducted a full review of the proposed budget and found few of the cuts are likely to actually be passed by Congress, even a Republican controlled Congress. Further more Bush has only proposed large cuts to small programs while the giant budget monsters continue to grow are near record rates. Finally, Bush refused to include the cost of Iraq/Afghanistan (which last year accounted for $160 billion in spending) nor his proposed changes to Social Security (Bush claims that will cost $1 trillion, the CBO says $2 trillion, most economists say $3-$5 trillion). If all of Bush's budget cuts are made and spending in Iraq/Afghanistan equals last year (BTW Bush has asked for increases here) then this will be the largest deficit in the history of the country. That's impressive given the size of the previous four deficits Bush has racked up.
So what is the coming crunch? Currently the US public doesn't have enough capital to cover the government's reckless borrowing so countries like Japan & China have had to finance it. The problem is this can't last forever. After Bush's tax cuts to the top 1% of American society the Federal government now takes, in inflation adjusted terms , about the same amount of money it did in the 1950's while spending remains where it has been in recent decades - much higher. Here's what the BBC has to say:
The Bush administration's chosen remedy is the least feasible one. Reducing domestic spending, or eliminating "waste, fraud and abuse" is toothless because this slice of the budget is too small to solve the problem.
Indeed, if Congress were rash enough to balance the budget in this way, there would hardly be any such spending left.
Law enforcement, space exploration, environmental clean-up, economic development, the Small Business Administration, housing, veterans' benefits, aid to state and local governments would all but disappear.
It's fantasy to think these routine government functions could be slashed.
The lion's share of the Budget goes to Defense, Social Security, and Medical Care. The Budget cannot even get close to balanced without dealing with these. Defense especially since there are so much discretionary funds in the defense budget. New weapon systems, most of which were designed to fight the cold war, will have to be eliminated and Bush's tax cuts for the wealthy will have to be reinstated. To do anything less is financial suicide.
Why is the budget such a big deal now? The reason is the rising federal debt, which will grow in 10 years, by conservative estimates, to more than half the nation's total annual output plus the retirement of the baby boomers. Bush's solution to our social security problem is to increase debt by $2 trillion (about 1 years income for the federal government) isn't realistically possible nor is it sound economics. Doing nothing and just paying the benefits owed will would cost $1 trillion or about half of Bush's solution. Better still would be to adjust retirement ages to reflect the longer life span of modern seniors or to lift the cap on social security taxes (currently any money over $90,000 per year is tax free; meaning millionaires and the well to do are getting huge breaks the average Joes aren't).
The BBC claims that the coming credit crunch will drive up interest rates and make the dollar continue to fall to record levels unless the government states behaving responsibly. Will the Republicans start to do that? I don't know but Reagan didn't and it is looking unlikely that Bush will either.
Much has been made of Bush's proposed cuts to the federal budget but the Washington based Economic Policy Institute (which is a nonpartisan group for sound budget policy which has been critical of Bush's deficits in the past) has conducted a full review of the proposed budget and found few of the cuts are likely to actually be passed by Congress, even a Republican controlled Congress. Further more Bush has only proposed large cuts to small programs while the giant budget monsters continue to grow are near record rates. Finally, Bush refused to include the cost of Iraq/Afghanistan (which last year accounted for $160 billion in spending) nor his proposed changes to Social Security (Bush claims that will cost $1 trillion, the CBO says $2 trillion, most economists say $3-$5 trillion). If all of Bush's budget cuts are made and spending in Iraq/Afghanistan equals last year (BTW Bush has asked for increases here) then this will be the largest deficit in the history of the country. That's impressive given the size of the previous four deficits Bush has racked up.
So what is the coming crunch? Currently the US public doesn't have enough capital to cover the government's reckless borrowing so countries like Japan & China have had to finance it. The problem is this can't last forever. After Bush's tax cuts to the top 1% of American society the Federal government now takes, in inflation adjusted terms , about the same amount of money it did in the 1950's while spending remains where it has been in recent decades - much higher. Here's what the BBC has to say:
The Bush administration's chosen remedy is the least feasible one. Reducing domestic spending, or eliminating "waste, fraud and abuse" is toothless because this slice of the budget is too small to solve the problem.
Indeed, if Congress were rash enough to balance the budget in this way, there would hardly be any such spending left.
Law enforcement, space exploration, environmental clean-up, economic development, the Small Business Administration, housing, veterans' benefits, aid to state and local governments would all but disappear.
It's fantasy to think these routine government functions could be slashed.
The lion's share of the Budget goes to Defense, Social Security, and Medical Care. The Budget cannot even get close to balanced without dealing with these. Defense especially since there are so much discretionary funds in the defense budget. New weapon systems, most of which were designed to fight the cold war, will have to be eliminated and Bush's tax cuts for the wealthy will have to be reinstated. To do anything less is financial suicide.
Why is the budget such a big deal now? The reason is the rising federal debt, which will grow in 10 years, by conservative estimates, to more than half the nation's total annual output plus the retirement of the baby boomers. Bush's solution to our social security problem is to increase debt by $2 trillion (about 1 years income for the federal government) isn't realistically possible nor is it sound economics. Doing nothing and just paying the benefits owed will would cost $1 trillion or about half of Bush's solution. Better still would be to adjust retirement ages to reflect the longer life span of modern seniors or to lift the cap on social security taxes (currently any money over $90,000 per year is tax free; meaning millionaires and the well to do are getting huge breaks the average Joes aren't).
The BBC claims that the coming credit crunch will drive up interest rates and make the dollar continue to fall to record levels unless the government states behaving responsibly. Will the Republicans start to do that? I don't know but Reagan didn't and it is looking unlikely that Bush will either.
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