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Less Money, Mo’ Problems

News & Features | February 22, 2010

This past year has certainly not been the kindest to the American economy. The unemployment rate is currently running at 9.7%, which translates to about 29 million individuals who are searching for work but can’t find it. There were nearly 4 million foreclosures in 2009, and, according to the United States Department of Commerce, the country’s gross domestic product decreased 2.4% in the same year. In addition, the federal government passed the $787 billion American Recovery and Reinvestment Act in order to, in President Barack Obama’s words, “stop the economic freefall.”

(Lorrayne Shen)

The most incredible figure, however, has to be the staggering debt the United States has accumulated. In 2009, the deficit reached a record $1.4 trillion, and is expected to keep growing. To put this figure into perspective, try to picture stacking one trillion bills, one on top of the other, until you had a giant tower of money. That stack would be about 68,000 miles tall, which would take you one-third of the way to the moon. The United States cannot continue to run a deficit this deep; in his State of the Union address, President Obama made it clear that dealing with this problem is a top priority.

In this State of the Union Address, the President proposed “…to freeze government spending for three years” starting in 2011. This means that all discretionary spending—meaning all government expenditure decided on an annual basis, will be capped at its current level of $447 billion, or one-sixth of the federal budget. Obama claims that the spending cap will save about $250 billion over the coming decade.

“Like any cash-strapped family, we will work within a budget to invest in what we need and sacrifice what we don’t,” President Obama maintained, “And if I have to enforce this discipline by veto, I will.” By taking such a firm stance on the reduction of national debt, Obama only highlighted the severe fiscal problems our country faces.

What is more important than what will be capped is what programs will still be allowed to increase spending. The President made it clear that “[s]pending related to our national security, Medicare, Medicaid, and Social Security will not be affected.” These programs, however, are some of the costliest to the American government and arguably some of the most inefficient.

Sen. Tom Harkin (D.-Iowa) expressed his regret that these programs would not be affected by the spending freeze: “Why exclude Defense, Homeland Security, and Veterans’ Affairs? Don’t tell me there’s not waste in those programs—a lot of waste.” Sen. Bernie Sanders (I.-Vt.) echoed Harkin’s sentiments and believes that the cuts could hurt the American public as a whole. “At a time when people are going hungry and our educational system crumbling, do we want to cut back or freeze these programs? No.”

President Obama has attempted to address these concerns by assuring the American public that, “We will continue to go through the budget, line by line, page by page, to eliminate programs that we can’t afford and don’t work.” The White House also realizes that one spending freeze will not solve the deficit problem in one fell swoop and says that this is just a first step towards better fiscal policy and stricter discipline in government spending. Regardless, some political pundits contest that his proposal is too little, too late.

There has also been skepticism about the timing, and the president has been accused of proposing the spending freeze for political, not fiscal, reasons. Many Washington politicians see the recent loss of the 60-seat Democratic supermajority in the Senate as a referendum on the current administration’s economic policy and spending. Obama is accused of pandering and changing his rhetoric in order to garner favor with Republicans and the American public as a whole. However, Michael Steele, a spokesman for the House Minority Leader Rep. John A. Boehner (R.-Ohio), expressed his disdain for the seeming hypocrisy: “Given Washington Democrats’ unprecedented spending binge, this is like announcing you’re going on a diet after winning a pie-eating contest.”

Regardless of whether or not this spending freeze passes, it is not a solution to the massive debt that the United States is in. This proposal should be viewed as a first step towards better fiscal responsibility under the current administration. President Obama has said he would “rather be a really good one-term president than a mediocre two-term president.” Making active steps towards managing overwhelming deficit certainly helps relieve not only our massive debt but also the fears of the American public.