Busted budgets

Colin Hannifin


There is little question that this massive economic downturn has been more than hard on most of us. Most of the American population has suffered greatly, and us college students are feeling the heat as much as – if not more than – everyone else. While prices of some goods have dropped, tuition keeps on rising, the bills are piling up, and jobs have been few and far between. College kids are especially feeling the crunch, with older, more experienced workers hitting the job market, asking for lower wages than they would’ve in years past—because, in this economy, any job is a keeper.

If there’s one thing this economy has taught us college students, it’s how to budget. Some of us figure out how to get by with minimal income, yet, we still manage to have our fun when Friday and Saturday nights roll around.

However, if there’s one thing the economy teaches the government, it’s apparently how to forget every basic principle of budgeting. As states struggle to balance their budgets, as they are federally mandated to do, the federal government writes check after check, funded by massive debt.

This seems especially true of the federal government under Obama. In 2008 – George W. Bush’s last year – the budget deficit was $459 billion. This is an outrageous amount, but consider it compared to 2009 numbers: a $1.4 trillion budget deficit—three times as much.

It’s important to keep in mind when considering the 2009 budget, it does not consider TARP payments (much of which has been paid back, but significant payments have yet to be recovered) or the American Recovery and Reinvestment Act. These two programs, designed to restart the economy (with mixed results), add up to about $1.5 trillion dollars.

The largest expenses laid out by the federal government, however, are not toward economic recovery. They are mandatory outlays, which the federal government is legally required to pay regardless of the economy or any other conditions, unless there is new legislation. These mandatory outlays include Social Security, Medicare, Medicaid, and various other programs (like unemployment, federal retirement, and Fannie Mae and Freddie Mac). According to the Congressional Budget Office (CBO), the big three (Social Security, Medicare, and Medicaid) cost the government a whopping $1.4 trillion dollars—that’s 68% of all mandatory spending.

The scariest thing, though, is that we are in no way near ceasing this spending. Because of the increasing elderly population and ever-increasing lifespan, the CBO projects that total mandatory spending will increase to $3 trillion by 2020, with $2.67 trillion (88.6 percent) being dedicated to the big three.

That’s not the only problem facing the federal budget. As deficits continue to pile up, so does the debt. The government funds it largely using bonds. In years past, debt the government owed was to its own citizens. Much of it still is; but an increasing amount is owed, now, to those abroad.

This could spell trouble in the not-so-distant future. According to the Guardian, China and Japan ended 2009 sitting on $755 billion and $769 billion, respectively. However, China sold $34 billion worth of US bonds in December of 2009, which could easily be an indication that they are uncomfortable enough with the economic position of the United States, and feel they are powerful enough to do something about it.

For years, America could count on the Chinese to buy American bonds. They had a ripe, growing manufacturing base, and America had – and still has – the world’s largest consumer market. However, China has plenty of consumers, and room to grow. America’s days as the world’s economic superpower may be coming to an end.

So what’s the proper response? Let’s go back to basics. Rule 1: Live within your limits. As a nation, we seemed to have gone away from that basic economic rule as credit card bills pile up and houses are foreclose.

One of the problems, though, is when you give something to your citizens, it’s hard to take it back. Social Security, accounting for almost a third of mandatory spending itself, has become an unnecessary drain on the economy. There’s always talk of privatizing Social Security. It is simply unsustainable at this point, but is that not what retirement accounts are for? Franklin Roosevelt implemented it as a way to boost spending during the Great Depression somewhat ironically, since it didn’t issue a payment until long after the start of WWII—effectively ending the Great Depression. At some point, the government will need to stop Social Security gradually and let citizens know, because many are counting on it for retirement.

Even Medicare and Medicaid seem unsustainable as more pills appear on the market. I don’t mean to trivialize people’s conditions, but the cost of drugs is somewhat extreme—especially when places like Wal-Mart can offer generic drugs for as cheaply as $5 a month.

While Obama’s spending freeze sounds great, as does his plan to cut spending – according to the Office of Management and Budget, they’ve already found a way to cut $23 billion – there has not been enough cutting in my opinion. After all, no matter how much we ‘freeze,’ we’ll still have to adjust costs for those departments integral to national security, like the Department of Defense and Department of Homeland Security. This government needs vast re-organization on a national scale. We don’t just need to find ways to nickel and dime back the budget by eliminating programs, we need to find a way to eliminate entire departments. We need to vastly scale back that for which the national government is responsible. There seems to be no way to realistically balance this federal budget – barring large tax increases on everybody (political suicide essentially) – that does not a drastically decrease the federal government. The only question remains is who has the gall to do it?

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