Posted on Tue, Sep. 09, 2008
Federal deficit soaring, but McCain, Obama offer no answersBy DAVID LIGHTMAN AND KEVIN G. HALL
Just weeks before the government's fiscal year ends Sept. 30, the nonpartisan Congressional Budget Office on Tuesday projected a near-record federal budget deficit of $407 billion, sharply higher than White House projections six weeks ago and more than double last year's figure.
Mammoth federal-budget deficits feed inflation, make America dependent on foreign lenders, cost taxpayers hundreds of billions of dollars in interest payments on the growing national debt and drain capital savings from more productive investments.
The widening gap between what the government spends and the revenue it brings in is sure to weigh on the next president and impede his efforts to spend on new or larger programs or to cut taxes.
Yet John McCain and Barack Obama show few signs that they're ready to take tough steps to curb deficits, according to budget analysts.
"I don't think either candidate is treating the deficit, or the debt, seriously. And I don't see any proposals from either one that would make the situation any better," said Robert Bixby, the executive director of the Concord Coalition, a bipartisan budget-watchdog organization.
Maya MacGuineas, the president of the bipartisan Center for a Responsible Federal Budget, said in a statement that both candidates "are promising hundreds of billions more in spending and tax cuts than they are paying for."
Republican nominee McCain has promised to balance the budget by 2013, but most analysts consider that goal elusive unless lawmakers make radical changes in Social Security, Medicare and Medicaid funding. McCain has made no such dramatic proposals.
Obama issued a statement Tuesday on the new data, promising that he'd "bring real change by cutting taxes for middle-class families and small businesses, paying for all his proposals to reduce the deficit" and working toward fiscal responsibility. He'd let tax cuts for the wealthiest earners expire and would impose higher taxes on certain corporations.
However, the Brookings Institution-Urban Institute Tax Policy Center has found that Obama's tax-reduction plan would increase the national debt by $3.5 trillion by 2018. McCain wants to leave existing tax cuts in place rather than let them expire, which the center said would add $5 trillion to the debt.
The CBO also offered a dismal forecast Tuesday, projecting a record deficit of $438 billion in the coming year due to the slowing economy, which would reduce tax receipts to the Treasury.
That fiscal 2009 deficit could rise another $83 billion if Congress, as expected, adjusts the alternative minimum tax. The deficit projection also doesn't include the potential costs to taxpayers from last weekend's seizure of mortgage-finance giants Fannie Mae and Freddie Mac. The CBO had estimated a takeover cost of $25 billion, although financial experts suggest that it could exceed $100 billion.
The CBO's latest estimate for fiscal 2008 is $18 billion higher than the Bush administration's projection six weeks ago. The record is $413 billion in fiscal 2004. Fiscal 2007's deficit was $161 billion.
"The significant expansion in the deficit is the result of a substantial increase in spending and a halt in the growth of tax revenues," the CBO said.
White House Press Secretary Dana Perino said that one big reason the deficit went up was the stimulus that President Bush signed into law in February. The CBO said that another large part of the deficit's unexpected growth came from rising unemployment-benefit payments and higher spending to cover insured deposits in insolvent financial institutions.
Another boost to the deficit came from Congress and Bush's appetite for discretionary spending, which is expected to rise by $85 billion, or 8.1 percent, in the current fiscal year, mostly because of higher defense costs.
The CBO projected that economic growth would slow to a 1.5 percent annual rate this calendar year and 1.1 percent next year. Even if the tax cuts of 2001 and 2003 expire as scheduled on Jan. 1, 2011, the deficit would be $325 billion the following year.
To bridge the gap between spending and tax revenues, the federal government borrows, increasing the national debt. It's grown from $5.7 trillion in 2000 to almost $9.7 trillion on Tuesday.
Analyst Bixby doubted that either presidential candidate's proposals would make a serious dent in the deficit and debt.
"Even if both of them can pay for their new initiatives and not make the situation any worse, the situation is unsustainable," he said. "Simply treading water is not good enough if you are headed over the falls."
© 2007 Kansas City Star and wire service sources. All Rights Reserved. http://www.kansascity.com
Sounds pretty bad eh? Well, it is, and here's how you can help. The Peter G. Peterson Foundation lists 10 general things you can do now.
1. Become informed about the key issues facing our country and society.
2. Teach children the importance of being financially responsible.
3. Register to vote. Your vote DOES make a difference. If you want the federal government to address the looming fiscal crisis, vote and let your voice be heard.
4. Engage current and prospective elected officials.
5. Vote for candidates who are leaders and responsible stewards for our future.
6. Hold elected officials accountable for acting on key issues and delivering on their promises.
7. Join with other citizens to broaden public knowledge about our fiscal challenges and support civic groups that are working to address them.
8. Establish a personal budget. Identify essential and luxury items and be diligent in cutting back excessive spending on luxury items.
9. Formulate a financial plan, make sacrifices, but stick to it.
10. Become more responsible in decisions to spend and use credit, save for the future and invest savings wisely.
Now, here are some of my own suggestions on specific ways you can do those ten things.
1. Other than reading my blog? Heh, well, personally I like to to read news.google.com and customize it to leave out the junk about celebrities and focus on the more important things.
2. Be frank with them about how much money you earn. Then tell them how much debt you have, how much the rent, mortgage, groceries, and other things cost. Then tell them how hard the work is to earn he money which goes into paying for all these things and how long it takes sometimes to finish paying off a bill. When they're older you can explain to them that the same principles that govern your family economy also govern the economy of different stores they go to, the school they attend, and even the government.
3. To register to vote online, go here: http://www.rockthevote.com/
I know for many of us it seems pointless to vote because we feel the majority in our state will always vote the same way. For instance, in my home state of Massachusetts we will definitely be voting for Barack Obama. However, if you have a different opinion on who should be president, let it be heard! Even if that person doesn't get any electoral college votes from your state, you can still let other elected officials, as well as other citizens, that there are some people in your state who want this other candidate and therefor may hold different values than one might stereotypically think based on the stat electoral college. Also, I think if everyone who didn't vote because they new it wouldn't make a difference did in fact vote, the total number of these people would in face make a big difference.
4. Engaging current and prospective officials is a really good way to get your voice hear, and believe me, you do have a real chance of making a difference this way. I have personally gotten responses twice from writing emails to my senator and representative. Here's a good website giving some good advice on how to go about engage these sorts of folks. http://www.heartsandminds.org/articles/lobby.htm Here's another helpful tool: http://www.visi.com/juan/congress/
5. Some of my favorites or Ron Paul, John Cunningham, Bob Barr, and Chuck Baldwin. Here's a website full of other similar-minded folks: http://paulcongress.com/Candidates.html
6. One organisation which is leading the effort to make government accountable is the We The People Foundation and their petitions for redress.
7. Well, I've already mentioned the We the People Foundation. Other good places are the Downsize D.C. Foundation, Ron Paul's Campaign For Liberty, The Heritage Foundation, and the Peter G. Peterson Foundation. Of these, I find Downsize D.C. the very best, and I think it could be the most effective in getting rid of our national deficit, increasing our freedom, and holding our elected officials more accountable all at once. I love it so much that I'll be dedicating several blogposts to them within this month.
8 and 9. Well, here's one free Christian personal finance book which might be interesting: http://www.scribd.com/doc/835/Managing-Your-Finances
Here's a basic form for you to fill out to set up a budget: http://financialplan.about.com/cs/budgeting/l/blbudget.htm
An About.com article about different helpful computer programs:
http://financialplan.about.com/od/software/tp/MoneySoftware.htm My mother, who also works for the Martha's Vineyard Savings Bank in the accounting department, does her family accounting using Quicken.
Finally, a helpful video: http://www.ehow.com/video_2202023_how-personal-budget.html
10. Using credit wisely (plus tips for people trying to pay off their student loan): http://www.youcandealwithit.com/credit_card_debt/using_credit.shtml
Ways to save money:
I hope you find this helpful.
Christopher D. Osborn
Vineyard Haven, Massachusetts, United States of America