Uncle Sam: $407 Billion in the hole.
Authors: Prabhu Jayasimha and Jesse Jerge
Date: September 16, 2008
Source: www.money.cnn.com
Background and Key facts:
The budget deficit will jump by $246 billion to $407 billion this year. The deficit shot up by 153% from last years’ shortfall of $161 billion. The national debt as of July 2008 is $9.5 Trillion and has increased from over $4 billion in year 2004. The significant expansion in the deficit is the result of a substantial increase in spending and a halt in revenue growth. In 2008, CBO estimates, federal spending will be 8.3 percent higher than it was in 2007; at the same time, total revenues will be less than they were in 2007. According to CBO's forecast, deficits will hit $431 billion in 2010 and then start falling. But the government would run a deficit of $126 billion in 2012 and grow to $147 billion in 2013. The projections assume Bush's tax cuts will expire at the end of 2010 as scheduled under current law.
Problem statements:
1. Huge budget deficit in an already slowing economy
2. Government spending increasing along with the deficit.
3. Deficit normally means increased taxes on a sluggish economy with inflation.
Causes and contributing factors:
One of the reasons of the deficit is the reduced tax revenue and increased government spending. The drop in revenue is driven in part by estimated 15% decline in corporate tax receipts. They fell as a result of lower corporate profits and tax rules governing how businesses depreciate their investments this year. A second factor is the rebates provided to tax filers from the economic stimulus law congress passes earlier this year. The increase in government spending is partly due to the efforts of the government to cover the ...