The federal budget deficit and national debt seem to be getting out of control. Only lately did the present economic crisis really set in for many people. The economic situation is defined by “job losses, home foreclosures, soaring personal debt and bankruptcies, failing corporations, collapsing and corrupt financial institutions, massive job loss, plummeting manufacturing and trade, and pervasive fear.”
The federal government is being forced to provide money to corporations, specifically banks, because of “business mismanagement that caused the nation’s markets to freeze.” The problem is that the federal government does not have the money to loan. By loaning out lots of money, the federal budget deficit and national debt will increase. So, the government prints more money, creating a rise in prices, affecting citizens across the nation. The government does need to act quickly on a “massive scale”, which it appears they are. I have heard that many people are upset at this “bailout”. It seems that these big businesses have acted luxuriously for quite some time and now that they are in trouble they want help from the government. Many people have been quoted saying, “It is the citizens of the U.S. that need the bailout, not these large corporations.”
As the article mentions, the nation was just beginning to address the already large national debt before this economic crisis. The problem is that when the crisis began and the government began acting in massive ways, we were already under a large national debt. These national deficits are predicted to increase in a huge manner by the “fiscal year 2010 budget.” The article states, “it may seem counter-intuitive that the way out of an economic crisis caused by mountains of bad debt would be to borrow more money, but economists across the political spectrum believe that’s the case.” I guess the only way borrowing money from a mountain of bad debt can help the economy is by stimulating the economy and causing people to begin spending more and begin placing more trust into the banking, housing, and auto industries. There is much controversy on bailing out the banks that gave out the bad loans in the first place and possibly rewarding them for their bad decisions. My mom works for a bank and she mentioned that the banks are taking strict measures in who they give loans out to and the process is much stricter as well. I think this is a step in the right direction. If these corporations and banks are being bailed out by the government, then the government should make sure that they are not making the same mistakes before. They need to make sure that people who are not really able to take out loans for whatever reason, should not get those loans.
Before the federal budget deficit and national debt can be addressed in the right manner, the current economic crisis needs to be under control. What helped bring the Great Depression to an end and helped stimulate the economy, besides the war, was the creation of construction projects and funded programs. Right now the war effort is not helping out that much, because although it creates jobs, the government is spending lots of money to continue that war effort. “Many of the construction projects and programs being funded will take a year or more to actually get under way and create jobs.” These new jobs will help stimulate the economy, but it will take time for these jobs to get under way. Once the economy is under control, then the deficit and national debt can be worked on.
The long term goal, of course, is to achieve fiscal balance. The article stressed addressing the short deficit and debt, that way in the long run there is not an even more massive debt. The article says we must not make dramatic changes in “health-care spending, Medicare, Social Security, and Medicaid entitlement programs, other government spending, U.S. tax policy, and the federal budget policy.” I believe this is so because if changes are made to any of these areas, it will upset an already unbalanced economy.
There are various things the government must do to address this deficit and national debt. The first thing is to “strengthen and expand systems to encourage responsible spending.” People must manage and spend wisely. This will reflect on the economy. The second is the government must show Americans how they are using money. This helps people place more trust in the government. As the website mentions, the third thing to be done is to “remove temptation: change the incentives for how our leaders spend our money.” People must be rewarded for acting appropriately when it comes to finances. “We should create rules and procedures that require the government to act responsibly.” This allows citizens to put further trust into the government. Hopefully, all of these things will help the economy and in turn help the deficit and national debt.