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Efforts to Reduce the Budget Deficit - Research Paper Example

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Efforts to Reduce the Budget Deficit Name: Institution: A report released by the Congressional Budget Office in November 2012 indicated that the Federal debt held by the public exceeded 70 percent of the GDP which is the highest since 1950. In 1950, the public debt had risen as a result of the country’s involvement in the WWII (Congressional Budget Office, 2012)…
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Efforts to Reduce the Budget Deficit A report released by the Congressional Budget Office in November indicated that the Federal debt held by the public exceeded 70 percent of the GDP which is the highest since 1950. In 1950, the public debt had risen as a result of the country’s involvement in the WWII (Congressional Budget Office, 2012). Even though the same report pointed out that the budget deficit would reduce markedly from $1.1 trillion in 2012 to around $200 billion in 2022, representing 58 percent of the GDP, it painted a grim picture of the economy (Kogan, 2012). Notwithstanding, the present economic pressures would make it hard to reduce the deficit unless stern and sound policies and regulations are put in place. Achievement of these projections is highly reliant on the momentous increase in taxes and decrease in spending. For this to happen, the lawmakers would be expected to alter the current policies which seem to encourage spending without a requisite growth in taxes. In this case, the lawmakers play a primal role as maintaining these policies would thwart the highlighted changes (Masters, 2012). This would mean that average annual deficits would be around 5 percent of the GDP for the next ten years. In the same period, public debt would rise to 90 percent of the GDP and would steadily rise thereafter. Long-term budget projections show that United States is at the risk of insolvency over the subsequent decades under the present tax and entitlement regime. To avert this risk, there is an immediate need for legislative action which has been historically relied upon to curb growing deficits and ensure balanced economic growth (Congressional Budget Office, 2012). This study looks at Congressional efforts from 1985 examining initiatives focused on addressing spending and revenues. Between 1985 and 2012, a number of budget controls were enacted to reduce the budget deficit. The most notable of these controls were the Balanced Budget, Emergency Deficit and the Budget Control Act. The Balanced Budget and Emergency Deficit Control Act of 1985, also known as the Gramm-Rudman-Hollings Act it came up with statutory deficit limits and a statutory mechanism to enforce the limits. At the time, Congress was using the congressional budget resolution as a means of setting and enforcing desired spending and revenue levels, the statutory deficit targets were created to address two limitations of the budget resolution. First, although a budget resolution can act as a procedural limit on the enactment of new spending and revenue legislation, the new statutory deficit limits sought to limit not just new legislation, but also the effects of the enacted revenue and spending laws (Federation of American Scientists, 2011). Second, while the levels in the budget decree are imposed by points of order on the House or Senate floor, the deficit targets were enforced by a mechanism that would require the President to order automatic spending cuts if deficit limits were breached. The Act was enacted following concerns of a growing deficit, in 1982, the deficit was $128 billion representing 4% of GDP, in 1983 it grew to $208 billion or 6% of GDP and in 1985 it was $212 billion or 5.1% of GDP. The Act came up with a requirement for the gradual reduction and elimination of budget deficits over a six year period by enumerating annual deficit limits (Federation of American Scientists, 2011). The Act required cancellation of spending by executive order which was to be even between defense and non-defense spending. The next Act was the 1987 Reaffirmation Act which rectified the problem left by the invalidated sequestration mechanism established by the Gramm-Rudman-Hollings Act (IRS, 2013). In extension, the Act extended by two years the timeframe established in the 1985 act to achieve a balanced budget, moving it from 1991 to 1993 and adjusting the deficit targets accordingly. The next move by Congress was enacting the Budget Enforcement Act of 1990 (BEA) which came as a result of emerging concerns linked to the deficit targets and the sequester mechanism of the Gramm-Rudman-Hollings Act (Federation of American Scientists, 2011). Unlike the Gramm-Rudman-Hollings Act which utilized budget controls to force future deficit reduction legislation, BEA sought to use budget controls to preserve the deficit reduction achieved in the accompanying reconciliation legislation. The Act established a two-pronged procedural approach to budgetary enforcement the implementation of pay-as-you-go procedures to control new direct spending and revenue legislation and discretionary spending limits to control the level of discretionary spending (Federation of American Scientists, 2011). There was also BEA 1997, the changes enforced by the Act were aimed at extending the existing budget enforcement procedures to ensure compliance with the multi-year budget policies established in the legislation, preserving the deficit reduction achieved in two reconciliation bills passed in the same year. The other notable move by Congress was the passage of the Budget Control Act in August 2011. The Act established limits on the amount of funds that would be availed each year for discretionary programs (White House:Press Secretary, 2011). Similarly, the Act also established “sub-caps” for defense and non-defense expenditure. References Congressional Budget Office. (2012, November 8). Congressional Budget Office. Retrieved March 18, 2013, from Choices for Deficit Reduction: http://www.cbo.gov/publication/43692 Federation of American Scientists. (2011, July 1). Statutory Budget Controls in Effect Between 1985 and 2002. Retrieved March 18, 2013, from Federation of American Scientists: www.fas.org/sgp/crs/misc/R41901.pdf White House:Press Secretary. (2011, July 31). Fact Sheet: Bipartisan Debt Deal: A Win for the Economy and Budget Discipline. Retrieved March 18, 2013, from The White House: http://www.whitehouse.gov/the-press-office/2011/07/31/fact-sheet-bipartisan-debt-deal-win-economy-and-budget-discipline IRS. (2013, March 04). Effect of Sequestration on Certain State & Local Government Filers of Form 8038-CP. Retrieved March 18, 2013, from IRS: http://www.irs.gov/Tax-Exempt-Bonds/Effect-of-Sequestration-on-Certain-State-and-Local-Government-Filers-of-Form-8038CP Kogan, R. (2012, November 8). Congress Has Cut Discretionary Funding By $1.5 Trillion Over Ten Years . Retrieved March 18, 2013, from Center on Budget and Policy Priorities : http://www.cbpp.org/cms/index.cfm?fa=view&id=3840 Masters, J. (2012, March 3). U.S. Deficits and the National Debt. Retrieved March 18, 2013, from Council on Foreign Relations: http://www.cfr.org/united-states/us-deficits-national-debt/p27400 Read More
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