Budget Deficit in USA Term Paper

  • Length: 4 pages
  • Subject: Economics
  • Type: Term Paper
  • Paper: #14261637

Excerpt from Term Paper :

Federal Budget surplus by focusing on the three consecutive years of surplus budgets achieved by the Clinton Administration after nearly fifty years during the last three years towards the end of the second term of President Clinton and his administration from 1998 to 2000.

President made public the new White House budget figures that expect a surplus of $39 billion for the fiscal year 1998 and a $150 billion surplus over a period of five years. Clinton felt that the time had come to shut the deficit cluck and start the surplus clock. He also believed that the American economy currently was the envy of the world, yet this was not preordained nor was it guaranteed for the future. So, he wished to continue his strategy of strict fiscal discipline and investments into the future that has made this surplus budget possible He believed very strongly that the surplus should go into the Social Security to save it and any other initiatives like tax cuts can be considered only after that. The OMB mid-session is more conservative than the Congressional Budget Office, which had projected the surplus to be somewhere between $43 billion and $63 billion, but in projections over the next five years the CBO had come up with the conservative estimate of $73 billion dollars. As a part of the presenting of the report of the OMB Office by the Director Jack Lew, he added that there was now a surplus to save. The President was of the opinion that in this election year lawmakers should not give in to the temptation to make merry with the surplus, but rather use it wisely in strengthening it for the 21st century. (Clinton Announces $39 Billion Projected Budget Surplus)

Initially most lawmakers supported the use plans to utilize the surplus to save Social Security, however in the recent times many Republican leaders have changed their stance in that they would prefer the surplus be used for tax cuts. President Clinton does not negate that possibility in total, but wants to make solvency of Social Security the first priority. The President gave credit to his administration for this rosy economic forecast, as when he assumed office the deficit for this year was projected to be $350 billion. This largest projected deficit in history was turned around to the biggest projected surplus by his administration in the old fashioned way of earning it. President Clinton gave credit to the Congress too in that this surplus became possible because of two visionary actions of the Congress. The first was the courageous vote of the Democrats in 1993, despite stiff criticism, that caused a cut in the deficit by ninety percent. This was followed up by the bipartisan balanced budget agreement that received the assent of the Congress that completed the job. (Clinton Announces $39 Billion Projected Budget Surplus)

On February 2, 1998 during a White House occasion President announced a budget plan whereby he expected the first budget surplus in about thirty years. Unless there was a major downturn in the economy the Clinton Administration expected the budget surplus to be about $9.5 billion. For the fiscal year 1999 and reach about $1 trillion in a span of ten years. This expected windfall has created a surplus fever amongst the economists and politicians in Washington. The talk has shifted from means to reduce the deficit to the ways to spend this surplus. President Clinton in his State of the Union address has sought that Congress keep aside this surplus till the Social Security system has been bolstered for the coming century. With the expected retirement of the baby boomers in a short while the President would prefer actions that at this time that ensured the security of the finances in the system that provided support to the Americans that were retiring. (Surplus Fever: The debate surrounding the anticipated budget surplus)

This has received support from both the parties with agreement that a part of the surplus should be made available to support the Social Security system but on the ways to spend the rest of the surplus there is no agreement. In the eyes of the Republicans this surplus budget calls for tax cuts, as these tax cuts will encourage further economic growth by encouraging future investments. Others with the inclusion of Alan Greenspan the Federal Chairman support a different action. They believe that this surplus should it come about should be used to assist in the reduction of $5.5 trillion national debt. This step would go a long way in reducing the long-term interest rates and thereby encourage savings and investment. There are the usual skeptics on the balancing of the budget leave aside the possible surplus, with some arguing that the government still spends more than it receives. (Surplus Fever: The debate surrounding the anticipated budget surplus)

The first blank-ink budget in about 29 years was announced by President Clinton and the surplus was to be around $70 billion. Considering this turnaround as a gift giving achievement for the generations to come he claimed credit for his administration. The Republicans claimed the credit of the surplus should go to them and was there despite President Clinton and that some part of this should be returned to the pockets of the taxpayers in the form of tax cuts. Despite all these tall claims as to who is responsible for the first surplus since 1969 there was no mention about the possibility of an economic recession wiping it all off and the continuation of surplus budgets. (Clinton Announces Budget Surplus)

In September 1999 the White House announced the largest surplus budget in the history of the U.S. Of about $115 billion. In 1993 President Clinton set about a three part economic strategy to that was to cut the deficit to enable a reduction in interest rates and spur business activity, to spend on education, health care and technology to enable the preparations of meeting the new challenges of the 21st century, and to open foreign markets, so that the American workers could compete fairly in a global environment and win. The first part has been achieved in the largest dollar surplus in history surpassing the $69 billion dollar surplus of the previous year. This surplus is the largest as a share of the economy since 1951 and is expected to be about 1.3% of the GDP, making it the largest on this basis since 1951 and the first back to back since 1956-1957. Spending restraint was the key ingredient for bringing in this era of surpluses. These surpluses would enable President Clinton to proceed with the remaining parts of his three part economic strategy. (Fact Sheet: The Largest Budget Surplus in U.S. History)

These surpluses have caused the largest debt reduction in history in the form of payment of public debts to the tune of $140 billion and the lower public debt has caused the interest payments to be $91 billion, lower than the projections. The debt reduction gives the American people the benefits that include lower interest rates on mortgage payments, lower interest rates on car payments, a cut in student loan payments and businesses have more money to put into productive investment and this rising investment would contribute to increased productivity. (The White Hose at Work)

President Clinton made the announcement that the federal budget surplus for the fiscal year 2000 would be in the region of $230 billion making it the largest surplus in the history of The U.S., by crossing the previous year's budget surplus of $122.7 billion. When President Clinton took over eight years earlier the future was at jeopardy, with low economic growth, high unemployment and growing federal debt. The budget deficit at the time of his assuming office was $290 billion and the projection…

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