The federal deficit refers to the amount of surplus money that the United States government is spending exceeding the amount of revenue raised. Over the years the US deficit has been going up causing major political conflicts. As it stands, the deficit is at $441 billion! This is according to the latest financial budget of the fiscal year 2017 which started on October 1st, 2016 and will be running to September 30th, 2017. In this fiscal year, the United States government expenditure is set to be at $4.073 trillion against the raised revenue which is $3.632 trillion.
Federal deficits have been in existence for more than 50 years except for around five years. This period, where the United States government had a budget surplus, was in the late 90s. President George Bush inherited this surplus, but within a few years, the government was back into debts once again. The reason for this deficit can be attributed to various factors that go back to the early 2000s.
1. The war on terror
One of the main factors that contributed to the rise in the deficit is the 9/11 terror attack. After this terrorist attack, the United States was forced to declare war on terror. Remember the military invasions of Iraq and Afghanistan? This war meant that the government had to double the military budget to support the war. More money was needed in equipping the army, establishing and sustaining intelligence agencies, improving homeland security, etc. As a result, the military budget rose from around $437.4 billion in the year 2003 to $855.1 billion in the fiscal year 2011. As the government continued to pump more money into this war, it continued to put massive pressure on the budget that the revenues could not sustain. Over time this resulted in the increase of the deficit.
2. Increase in mandatory spending
The other main contributing factor for the increased deficit is the rise of mandatory spending. Mandatory spending includes the many expensive yet necessary programs that the government is forced to sustain. Some of these programs include Medicare, Social Security, etc. Since the fiscal year 2011, the amount of money spent on mandatory programs has never been less than $2 trillion a year! These spending are one of the expenditures than consuming the majority of the revenue that is raised every year. The ideal way to deal with this would be to reduce the spending, but then this has proven to be very hard due to political interests. Reduction of the mandatory spending would mean that a majority vote of the Congress will need to happen to amend these programs. Reducing that spending will mean that the beneficiaries of these programs will have to lose money. The biggest beneficiaries happen to be the senior and most influential people in the society. This, therefore, makes the Congress avoid interfering with such people’s interests because they are powerful and capable of voting the lawmakers out.
3. The 2008 economic recession
The third reason for the high deficit is the economic downturn that hit the United States in 2008. The massive recession reduced the government taxes and revenues significantly making it even harder to meet its budgetary needs. During this time, the government’s income decreased from $2.568 trillion in the pre-recession fiscal year 2007 to $2.1 trillion in the post-recession year 2009. The reduced income was a significant blow to the economy forcing the government to seek alternative ways of raising money for expenditure. It meant seeking foreign funding and this consequently led to increasing in debts. It was not until the 2013 financial year that the economy recovered fully from this recession.
4. The economic stimulus package
Following the economic downturn of 2008, the government was in 2009 forced to pump an extra $787 billion to stimulate economic growth. This package was aimed at extending unemployment benefits and cutting down on taxes. Part of the funds was also used in the funding of public works projects which were supposed to create more jobs directly. This was one of the measures that the government had put in place in an attempt to move the economy past the recession nightmare. Even though the money managed to reignite the economy, it had still increased the deficit.
Economists explain that it is hard or nearly impossible for a government ever fully to get rid of its debt. The United States government will always plan to overspend regardless of how much revenue is raised. Overspending helps them to stimulate economic growth and create more jobs which assist the people in government to be reelected. After all, there are countries such as China that are always willing to lend the US money to boost growth. The fitness industry is another niche worth keeping an eye on. For example, streetworkouttraining is among the latest fitness trends.