|
Based on state of Iowa's estimated revenue of
$6,280,600,000
for the current fiscal year (2013), which ends
June 30, 2013.
Amount is calculated according to the date and time of your computer.
|
|
Is the Fiscal Crisis Over?
by John Hendrickson
A false sense of optimism has struck policymakers as the Congressional
Budget Office (CBO) recently projected that in 2013 the federal
government will only run a $642 billion deficit instead of the annual
trillion dollar deficits that marked the previous fiscal years.[1]
The lower deficit, combined with the optimistic view that the
unemployment rate is getting lower, has resulted in some policymakers
and market analysts rejoicing that full economic recovery is just around
the corner. The fact remains that this economic optimism is false. The
2013 deficit and the unemployment rate (7.6 percent) may be lower, but
serious structural problems remain in the economy.
For example, the $642 billion deficit is on top of the trillion dollar
deficits of the previous years. The escalating national debt of close to
$17 trillion does not even include the costs of unfunded mandates from
entitlement programs such as Social Security and Medicare. It should be
noted that Keynesians are also concerned about the smaller deficit, not
because spending less is better, but because they believe more spending
or “investments” will lead to economic growth. In addition, the
unemployment rate may be “officially” declining, but the numbers of
people who have either given up looking for work or are underemployed
are not taken into consideration. In fact the number of individuals
requiring governmental assistance such as food stamps or disability
continues to increase.
Economic policy uncertainty also remains as the private sector is
waiting for the impact of regulations, tax increases, and the
implementation of the Patient Protection and Affordable Care Act. The
Affordable Care Act is a major aspect of the policy uncertainty that
confronts the economy. The new health care entitlement will not only
cost taxpayers a significant sum of money, but will burden them with tax
increases. Christopher Jacobs, a Senior Policy Analyst with The Heritage
Foundation, noted:
Obamacare contains no fewer than 18 tax increases, including new taxes
on medical devices, insurers, and pharmaceutical companies, to name a
few. According to the most recent estimates, those tax increases will
raise revenue by at least $1 trillion over the next 10 years — followed
by higher sums in future decades. Moreover, 12 of 20 tax increases will
affect middle-class families, directly violating [President] Barack
Obama’s ‘firm pledge’ to families making under $250,000 per year that he
would not raise ‘any of your taxes.’[2]
President Obama’s budget also does not address the fiscal crisis. The
current budget proposal by President Obama “never balances and reports
growing spending from $3.6 trillion in 2013 to nearly $5.6 trillion in
2023, while maintaining debt at an economically risky 76 percent of
gross domestic product (GDP).”[3]
Curtis S. Dubay, a Senior Policy Analyst with The Heritage Foundation,
wrote that “President Obama’s budget includes tax increases that total
$1.103 trillion over the 10 years from 2014 to 2023.”[4]
The current policy climate as well as the general economic outlook is
still very uncertain and it is too early to embrace optimism. The
alternative budget proposal, “The Path to Prosperity,” which was
authored by Representative Paul Ryan (R-WI), who chairs the House Budget
Committee, actually would provide for a more fiscally sound economy and
policy stability. John F. Cogan and John B. Taylor, both policy scholars
at the Hoover Institution, described the economic impact of the “Path to
Prosperity” budget:
According to our research, the spending restraint and balanced-budget
parts of the House Budget Committee plan would boost the economy
immediately. With the Budget Committee's proposed tax reform included,
the immediate impact would be even larger. The entire plan would raise
gross domestic product by one percentage point in 2014, equivalent to
about a $1,500 increase for each U.S. household. Ten years from now, at
the end of the official budget horizon, we estimate that the entire plan
would raise GDP by three percentage points, or more than $4,000 for each
U.S. household.[5]
“The Path to Prosperity” provides a policy solution to both the slow
economic growth and the fiscal crisis by implementing spending restraint
and tax reform, and bringing reform to entitlement programs to save them
for future generations. This is the complete opposite of President
Obama’s budget proposal.
The reality is that the economy continues to be weighed down by the
Great Recession and the fiscal crisis remains. The only solution to
resolve unemployment, restore the fiscal credibility of the federal
government, and create economic growth is to implement sound ideas that
will create stability. These are not based upon big government ideas,
but rather limited-government policies based upon reducing spending, low
tax rates, limited regulation, and a strong dollar. Until these policies
are implemented the fiscal crisis and slow economic growth will
continue.
John
R. Hendrickson is a Research Analyst at Public Interest Institute.
The views expressed herein are those of the author and not necessarily
those of Public Interest Institute or Tax Education Foundation. They are
brought to you in the interest of a better-informed citizenry.
|