August 14, 2012
Depending on whether a country is running a deficit, a surplus, or a debt, businesses and individuals are affected differently. “The most important budget in the world is that of the United States government. The U.S. budget impacts not only the United States of America but foreign investment, trade, and the economies of nations throughout the world.” (Boothe, 2003) The objective of this paper is to provide examples of how the United State’s deficits, surpluses, and debt affect individuals and business both domestically and internationally.
Deficits, Surpluses and Debt; an Overview
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The American products would be exported more making them seem more desirable. The debt of the United States will make stock of a company more susceptible to sell offs when there is bad news concerning the company. It also makes the same investors less aggressive to buy stocks.
Effects on the GDP
The GDP, when the United States is running a deficit suffers the same as that of a typical export. As exports decrease the GDP suffers due to the lack of sales of American goods. While operating in a surplus the GDP, would reflect the added sales of American goods to foreign markets. This would drive the GDP up. The GDP tends to fall with an increase of the national debt. This is due to the fact that with debt, American goods are exported less. With the ensuing decrease in exports the GDP falls. The amount of exports is a factor in the equation for determining the GDP.
Effects on Tax Payers
Because of the need to reduce the deficit, the government may be looking to American tax payers and businesses as the solution. If the tax cuts of 2001 and 2003 stay in effect the deficit will continue to increase. The government’s 2013 fiscal budget plans to take in $2.902 trillion through income and payroll tax (Amadeo, 2012). As payroll and income taxes increase, the government increases revenue to pay down the deficit, but taxpayers will have less spendable income.
Effects on Future Social Security and Medicare Users
The Social Security System is a social insurance program that provides financial benefits to the elderly and disabled and to their eligible dependents and survivors (Colander, 2010). The largest mandatory spending programs are Social Security and Medicare, making up about 60% of the United States Federal Budget [ (Amadeo, 2012) ]. Social Security costs are currently 100% covered by payroll taxes and interest on past payroll taxes that has been invested. Medicare is financed by general taxes. In order to balance the budget some of the mandatory spending programs may be cut. Because Social Security and Medicare are the largest programs, cutting these programs will create the largest savings. Many elderly and disabled Americans rely on Social Security and Medicare to financially survive. If these programs are cut individuals will no longer have the financial ability to live on their own and may need to look to family members or friends just to survive, causing an even greater...