U.S. Budget Deficit: 2009 Presidents Budget

The Consequences of the President 's Budget for the U .S . in the Long Run

Recently , President Bush proposed a budget for the United States which contained many changes in the government expenditures and taxations . The budget if approved , will take effect from October 2008 to September 2009 . The various provisions included in this budget will be debated by the Congress

Thesis : The official projections that the U .S . budget would balance by 2012 is unrealistic , because the Administration assumes an implausible drop in government spending , understated war costs , and that the

tax cuts enacted in 2001 /2003 will expire at the end of 2010

What - Demonstration

The 3 .1-trillion budget , which would more than double the deficit takes on board the stimulus package just passed by the Congress . This increase reverses the budget improvement of the past three years . Though this package was passed in to prevent the U .S . economy from going into recession , its long-term effects are just that of a complete crowding-out , where investments would decrease . On the other hand , this will not affect the GDP in the long-run , but this will just increase the deficit as government spending increases . Not only the fiscal stimulus is obviously a factor behind this year 's surge in deficit , this also reflects a weaker economic growth and a decrease in tax revenue . Despite that , the Administration insists that the deficit jump is temporary and that U .S . will be operating in the black (Gosselin , 2 ) for the first time in a decade

Reaching balance in 2012 by cutting on wasteful spending (Budget 3 ) is the highlight in the President 's 2009 Budget . This plan reduces domestic spending on Medicare , huge health insurance program for the elderly , Medicaid and the state-federal health program for the poor (Gosselin , 2 . They believe that one of the benefits of tax cuts is that it will keep government spending in check (Becker 3 . They also assume that the tax cuts will expire at the end of 2010 . This will cause an increase in taxes . And since public saving equals the taxes minus government spending , the increase in taxes would cause the deficit to decrease . But these are optimistic assumptions which are unlikely to happen like that Congress will drop its temporary relief from the Alternative Minimum Tax (Gosselin , 2 ) wherein reality tax revenue will most likely drop in the short-term as many believe the nation may already be in a recession (Weisman , 3

How - Complication

In reality government spending is likely to increase due to understated war costs and the failure to freeze domestic spending . First the administration assumes only 70 billion in costs for Iraq in Afghanistan wars next year , a fraction of the true costs (Weisman , 3 They also assume that beyond 2009 , the budget includes no war costs at all (Weisman , 3 ) Secondly , the plans to freeze domestic spending will likely face stiff opposition in Congress . So a decrease in government spending is unlikely as it drew the sharpest...