Essay by:
Fan Liu
Emporia State University

Due to the 2008 Financial Crisis, the federal budget deficit is becoming worse and adding to the national debt. The current national debt, according to government report on treasurydirect.gov, on December 8, 2009, is $12.1 trillion and this number is still growing! (The Debt) How could the Federal budget deficit be this huge amount and what we can be done to help the American economy get back to a healthier condition?

At the beginning of this year, President Obama signed the $787 billion economic stimulus package and tried to heat up the American economy. One of the main purposes of this package was to prevent the panic from happening again by investors in 2008. In order to calm down residents in America, the government tried to relieve some private debt burden, and help people find jobs.

The American economy absolutely could be stimulated more if the government spends more. However, due to the huge national debt, the American government only has one way to get more money, which is borrowing. If it had accumulated surpluses when the economy was at full employment, this would not be a crisis. The government needed to spend this money on creating jobs, cutting taxes, encouraging consumer spending, and working on some other policies to avoid a depression.

Since the rate of unemployment increased in this recession, many people do not have income to cover their credit card debt. Therefore, they have to use some government programs, like unemployment insurance, to help them go through this tough period. By the increasing number of workers forced to use programs, the cost of American government goes up. Moreover, the government cannot just keep existing programs, but it was forced to create new programs to fit this special recession; otherwise, a depression could have developed. The cost of creating these new programs increased the deficit and national debt. In addition, the recession cost people’s jobs and the government will not have as much income tax revenue.

During the Opening Session of the jobs and Economic Growth Forum on Dec. 03, 2009, President Obama claimed that American economy has a significant turnaround since the beginning of this year. The economic was in freefall; 700,000 jobs were lost per month. The Recovery Act the government passed stopped the freefall, and the economy may have started growing. However, the most important purpose of this Forum was encouraging businesses to create jobs. He said, “While I believe that government has a critical role in creating the conditions for economic growth, ultimately true economic recovery is only going to come from the private sector.”(Office)

By looking at another aspect of the government’s actions, it was obvious reducing tax rates helped people relief some of stress. Nevertheless, it also decreases the government income, which means the government will face to a bigger deficit now and in the future. According to whitehouse.gov, for middle class, 95 percent of all working families can receive a tax cut and 70 percent of tax benefits will be spent on more than half of American workers. In addition, “more than $150 billion in tax cuts will help low-income and vulnerable households during the economic recovery.” (“Taxes”) More taxes cut means less taxes revenue for the government; this causes national debt to increase.

The federal budget deficit definitely hit a record and the deficit in 2009 has more than tripled in just last year. David Jackson posted an article on the USA Today and showed that the deficit total will reach $9.1 trillion in the coming decades. (Jackson) As a result, the amount of the national debt will keep increasing, and interest on the national debt will become a big problem.

Although the economy of America may have begun to turnaround, the large amount that will be owed in interest due to the national debt will be a big problem, especially as interest rates increase. If the government does not have the ability to payback in a certain time, or even as if there is concern about its ability to finance it debt, the number of countries who would like to lend money to America will go down. Then it will be much harder for the American economy to grow.

The 2008 Financial Crisis caused a series of problems and the national debt is one of them. People can try to save money and earn more; this will help, but it is not enough. The problems that began long before 2008 cannot be corrected easily. In order to decrease the federal budget deficit in the future, one thing that American government must consider is raising taxes. In the future, the government should consider the need to raise taxes again if it does not have a surplus or at least a balanced budget when there is full employment. Another thing it should consider is paying for things, even war, without borrowing. Shifting the burden to future generations should not be an option.

Work Cited

Jackson, David. “Obama team makes it official: Budget deficit hits record. By a lot.” Oct 16, 2009. Dec. 9, 2009. http://content.usatoday.com/communities/theoval/post/2009/10/620000005/1

Office of the Press Secretary. The White House. “Remarks by the President and Vice President at the Opening Session of the Jobs and Economic Growth Forum”. December 03, 2009. 1:42 P.M. EST. Dec.9, 2009. http://www.whitehouse.gov/the-press-office/remarks-president-and-vice-pr...

“Taxes”. The White House president Barack Obama. Dec. 9, 2009. http://www.whitehouse.gov/issues/taxes
“The Debt to the Penny and Who Holds It”. Treasurydirect.com. Dec. 9, 2009. http://www.treasurydirect.gov/NP/BPDLogin?application=np




Re: Old Debt, Big Deficits, Bigger Problems

I agree with raising taxes now and later (a couple of years) if needed to help us get out of this recession!


Re: Old Debt, Big Deficits, Bigger Problems

This is very intresting. I had no idea some of the information you describe was going on. I mean I knew our country was in debt but when ever I heard about it in the news I would quickly drift away because of how it was presented. I feel that your essay breaks it down for me which is good because i really should know these things by now.


Re: Old Debt, Big Deficits, Bigger Problems

You sited everything very well in this essay. I think you made everything clear on what is REALLY going on. Sometimes like the others said we dont really know the whole truth we know what they tell us. You made it all seem easier to understand!


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