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Efforts to Reduce the Budget Deficit - Essay Example

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Efforts to Reduce the Budget Deficit Author’s Details: Institutional Affiliation: Efforts to Reduce the Budget Deficit It is now in the history books; the US debt crisis got even worse under the stewardship of the current regime to outstrip the gross domestic product (GDP) by over 100 percent in the year 2012, three years after surpassing the $1 trillion mark for the first time, all courtesy of a worldwide financial crunch that originated in our very own backyard (Thornton, 2012)…
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Efforts to Reduce the Budget Deficit
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Download file to see previous pages Indeed in line with the conventional analyses, the United States has been a clear example of how disruptive an increasing debt deficit is to the long-term economic growth. The national debt has not only suppressed the overall national savings, which, in effect, has reduced domestic investments, but has also increased the country’s borrowing abroad, as evident in the current account balances. It is undeniable that sustained national debts over the years have played a lead role in increasing interest rates, making internal borrowing for investments expensive, hence the capital from abroad to finance the federal budget for almost every government that has ever been in place. As a result of the alarming successive decreases in the national income due to the huge returns from the domestic capital stock accruing mostly to the foreigners, a trend that has now erected caps on the national productivity via a mounting unemployment, several statutory budget controls have been enacted by the congress to reduce the budget deficit, with most notable efforts beginning in the year 1985. After years of disagreements between Congress and the President [Regan, to be precise] on either tax increases or spending cuts as a way forward in halting the trend of deficit growth, members of Congress from both sides of the divide finally passed the Balanced Budget and Emergency Deficit Control Act of 1985 [popularly known as the Gramm-Rudman-Hollings Act ("GRH")]. Passed and approved by the President as “an important step towards rectifying decades of fiscal failure” GRH laid down procedures of eliminating the federal budget deficit that stood at $200 billion in 1986 by the year 1991 (Stith, 1988). GRH was essentially a binding enactment, enforced independent of the legislative budget process and the executive orders, which had failed in cutting down the total government spending and/or resisting political pressure for more government programs. The celebration particularly for President Reagan who had grander ambitions of reducing the share of the national resources consumed by the federal government was, however, short-lived, as the provisions of GRH was ruled a ‘violation of the principles of the separation of powers’ in 1986 by the Supreme Court in Bowsher v. Synar. To save efforts that went into making the GRH from complete collapse, the Congress went back to the drawing board, eliminating the constitutional defects identified by the Supreme Court eventually producing an amended version of GRH that moved automatic sequestration process from the hands of Comptroller General to the Office of Management and Budget (OMB) in the Office of the President (Stith, 1988). Accordingly, the deficits decreased in the subsequent years as a result of substantial cuts in spending accompanied by economic growth that ensured increased revenues. With the turbulent Bush administration in the 1990s, GRH proved insufficient in restricting the growth of the deficits. Congress, thus, reached an agreement with the regime allowing for a combination of “tax increases and caps on government spendin ...Download file to see next pagesRead More
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