United States public debt Essay Example for Free

United States public debt Essay The United States deficit, surplus, and debt will always have an impact on taxpayers. In the state of high deficit the government seeks ways to cut and save money for debt payment. The government does this by pulling funding from programs that have little government impact. Increasing taxes also supplies the government with extra income. In addition to the reduction or elimination of certain tax credits, the government analyzes school funding for cost effectiveness. Each step the government takes has a trickling effect on taxpayer’s dollar. The Effects of U.  S. Deficit, Surplus, and Debt When a surplus exists, the government has extra funds to spare and infuse into the economy. This surplus will increase government programs. When the government has a surplus it focuses on its needs by order of necessity, similar to the way individuals do when they have extra money. This can lead to new tax credits for taxpayers. However, when the nation is in debt the taxpayers are also in debt. The government uses tax money to finance their operations. If debt increases taxes go up, if debt decreases taxes lower for most. Effects on Future Social Securities and Medicare Taxpayers are affected by the U. S. deficit when there is a shortfall in revenue, which is the result of the National Debt increasing. Surpluses also have an effect on taxpayers as well. Programs like Social Security and Medicare receive government funding from tax money. Social Security takes contributions made by citizens to accumulate a surplus, which it uses to buy government bonds, which are government debt. These bonds accumulate and eventually mature. The money from the mature bonds helps to pay retirees. As American citizens contribute money into Social Security, the bond purchases mean that the government owes the Social Security program the value of the bonds purchases (Colander, 2010). The debt reported by the government for this purchase, however, is for on-budget accounts, while the U. S. reports unified accounts which include on-budget accounts but also adds off-budgets accounts as well. Like Social Security, Medicare relies on contributions made by citizens. However, Medicare makes use of third party payer markets, which helps people receive services who may be different from those who provide the services. Third party payer systems take contributions to help defray the cost or expense of providing the service while a portion of the services, such as Medicare, are paid by the consumer through the use of a co-payment system. The expenses incurred by instituting a program, such as Social Security, means that the costs of using this program are set against any revenues made for that same year. The cost of running Medicare and Social Security will rise as more Americans reach retirement â€Å"This will require more benefits be paid out than revenues are coming in, thus increasing the expenses and increasing the deficit† (Blahous, 2011). â€Å"The Social Security Administration figures that by the year 2040 the SS trust fund will be used up causing utilization of one of three options: borrowing, increasing revenue, or lowering benefits. The Medicare program is estimated to be much closer to crisis than the SS trust fund. In contrast to current Medicare and Social Security benefits budget of 35 percent, an increase to 60-65% may be necessary as early as 2030† (Colander, 2010). Current legislative discussions by political parties recognize the potential impact on future economic growth that this increasing deficit may have and are seeking ways to address as well as reform programs such as Medicare and Social Security. Unemployment and the Deficit Just as Social Security and Medicare are affected by the United States deficit and surplus, so is the unemployment rate. Increasing unemployment rates increase the deficit thus naturally reducing the deficit decreases unemployment rates as well. According to Ginsburg and Ayres (n. d. ), â€Å"The President and Congress try to outdo one another on who can cut the Federal budget deficit the most. But efforts to reduce the deficit at the expense of necessary social programs are unnecessary and counter-productive. In fact, much of the recent reduction in the deficit is due to the decline in unemployment† (p. 1). With record high deficits within the last years the idea of the government spending to spur the economy that ultimately would help reduce the unemployment level seems near impossible without further affecting the deficit rather than helping reduce it. University of Phoenix Students When students default on their loans, it adds to the national debt. The main problem lies in the fact that newly graduated students can’t find jobs that pay enough to reduce their debt â€Å"Tarah Toney worked two full-time jobs to put herself through college, at McMurry University in Abilene, Texas, and still has $75,000 in debt. She graduated in six years with a Bachelor’s in English and wanted to go on to teach high school† (Jaffe, 2011). Yet the government still requires the students to make on time payments. A surplus allows the government to use more money for grants and loans. The extra money from the budget goes into programs like the Pell grant. This enables more students to borrow or receive money to attend college. A deficit of funds affects students the same way student debt affects the government. To combat debt, cuts to government funding will take place. When the government cuts education funding, programs that fund grants lose money. The United States International Financial Reputation In addition to domestic ramifications regarding the United States deficit, surplus, and debt, international standing can waver due to a weak economy. These topics play an immense part in formulating this nation’s global standing. Maintaining its reputation as a world superpower is arduous during economic crisis. The deficit consists of the dissimilarly in government’s income and its disbursement. Other countries closely watch the deficit/surplus gap. America reputation rest whether it is positive or negative on the amount of the deficit. When the nation spending exceeds the amount it receives, America’s economy seems to be at risk. A surplus in funds strikes a balance to the United States receiving more money than it spends. Hall (2012) states, â€Å"†¦surpluses and deficits result from policy choices about government spending and taxes† (para. 6). If a surplus transpire because of the government not administering funds toward the policies that can help the United States run more efficiently, this can shed a negative light on its globe’s personal image. A Domestic Automotive Manufacturing (Exporter) As an exporter of domestic automobiles, the nation’s deficit, surplus, and debt can impose the prospering or nonsuccess of exporting. An economic strain on funds seeps down and effects American businesses. America prospers from its export and import business. Exporters in the automotive manufacturing lament when the nation’s deficit/debt is high. When America economy is failing, it experiences a lofty volume of automotive imports. American automotive manufacturers languish during economic decline. The automobile industry as a whole continues to be depressed as a result of the global economic depression† (Thompson Merchant, 2010, p. 12). Despite America’s economic problems Japanese manufacturers appear to thrive. Thompson and Merchant (2010) state, â€Å"†¦foreign automakers Toyota and Honda continued to achieve record high revenue levels through 2008 as they increased their market share in the United States† (pg. 12). During a surplus, automotive exports escalate for American manufacturers. A surplus in funds results in the nation’s ability to pay its impounding debt. Lowering debt equals lower interest rates. A surplus makes it easier for manufacturers to safeguard loans to export automotive parts. U. S. Deficit Effect on International Import The economies deficits, surpluses, and debt have an influence on both an Italian clothing design importer and GDP. For example, America can import clothing from an Italian clothing company. If the country has a financial deficit, they must reduce importation and focus on local product. This hurts international trade. A government surplus allows the country to purchase an increased amount of foreign goods. Surpluses, deficits, and debts also affect the nations GDP. As imports increase and deficits and debts increase, the GPD in the nation will decrease as less domestic goods are being sold in the country. When exports increase and a surplus occurs than GDP will increase as well as when there are more domestic products being sold in and out of the nation. Gross domestic product is the amount of products made in the country and sold. These can be both domestic products made and sold here along with exports made and sold elsewhere.