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U.S. Financial Challenges Weigh Heavy But Not Hopeless

Friday, February 1 2013 9:49 AM

On Jan. 2, fiscal cliff tax cuts became law, some permanently and some temporarily. For about 98 percent of Americans, it was very good news, since taxes were not increased by the anticipated $3,000 to $7,000 per year. One tax that did increase for every wage earner is the payroll tax. This tax, which had been lowered the past two years, was increased to 6.2 percent. The revenue will go to the Social Security Trust Account to pay Social Security payments.

The easy part—cutting taxes—is done, but here are other fiscal matters Congress will need to address in the upcoming months:

  • Sequestration—cutting $600 billion in defense and $600 billion in discretionary spending, over 10 years—was delayed from Jan. 2 to March 2. Congress will need to decide if those cuts are going to happen before then.
  • The federal government operates with a continuing resolution (CR) for spending, since no budget has passed Congress in four years. The CR ends March 31. Congress must pass another CR or a budget by then, or the government will shut down.
  • The debt ceiling, or maximum amount the federal government can barrow, will be reached by mid-February. The ceiling is at $16.4 trillion. That must be increased for spending to continue. The House has extended the CR and increasing the debt ceiling until May 19. By then, Congress must pass a budget, or the Senate and House will have to agree to extend the CR and increase the debt limit.

One trillion is a number that’s difficult to put into perspective. On paper, it’s a 1 with 12 zeros after it, but think of it this way: If I spent $1 million every day since Jesus walked the earth, I still wouldn’t have spent $1 trillion by now. Our national debt is more than 16 times that amount.

Almost all legislators agree spending cuts need to occur. Conservatives are promoting major spending cuts—more than some members of Congress want to see. Entitlement areas, including Medicare and Social Security, are frequently mentioned as possible targets. Medicaid, which is a federal- and state-combined program run by each state, is often identified by both the federal and state governments as needing reform. Doing so would minimize increases in spending as the population served by the program grows. These programs are unsustainable in their current form with spending. Here are recent expenditures:

  • Medicare was established in 1965. In 2010, there were 47 million beneficiaries for an annual cost of $509 billion. It is estimated that 80 million people will be eligible in 2030.
  • Social Security paid $713 billion in benefits to 54 million beneficiaries in 2010, while $781 billion was collected from payroll taxes.
  • Medicaid spent $401 billion in 2010 ($268 billion in federal funds and $131 billion in state funds) covering 63 million Medicaid enrollees.
  • The U.S. military, Homeland Security and other defense sectors spent $740 billion in 2010.
  • Interest paid on the U.S. debt was $251 billion in 2010.
  • The rest of the federal government spent approximately $660 billion in 2010.

Medicare will go broke in 2024 if changes to the existing system are not made. The same goes for Social Security in 2037.

I anticipate there will be heated discussions in Congress regarding what spending cuts should occur this year. And I am confident there will be reductions. When our fiscal house is in better shape—and it will be in better shape—America will continue to be the strong and caring leader of this world. You can help ensure we are that leader.

As a constituent, let your elected officials know how you feel as issues and questions arise. Please contact me if you would like contact information for your elected officials.

By Jeff Stingley
Director of Public Affairs
Source: www.good-sam.com

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