U.S. Fiscal Responsibility – Increase Revenues and Decrease Spending

In the previous blog U.S. Fiscal Responsibility – An Assessment of Growing U.S. Deficits and Debt Obligations I discussed the factors contributing to the U.S. debt, potential dangers if irresponsible fiscal policies continue, and a strategic direction for returning to fiscal responsibility. Of equal importance are receipts (tax revenues) and outlays (government spending) and how those allocations are distributed, which will be discussed in this blog. As of October 2010 the U.S. debt has grown to $13.5 trillion, a 131% increase in a decade. Bush administration fiscal policy resulted in a record $4.22 trillion increase in U.S. debt. This was principally caused by lost revenue from the enactment of the 2001 and 2003 tax cuts, the wars in Iraq and Afghanistan, and increases in federal spending that added $700 billion a year to the budget. These spending increases were not matched with additional tax revenues expected from the economic growth the Bush tax cuts were projected to provide. The Obama administration soon outpaced the debt increases of the Bush era by racking up $3.53 trillion in less than 2 years. Debt increases from the Obama administration were driven largely by hundreds of billions in stimulus programs to spur the economy out of recession, a $1 trillion down payment on the new health care program, and escalations in spending for safety net programs and education.