Tuesday, May 10, 2011

A student's reaction paper reflecting on the budget problems.



Today I want to discuss my thoughts on the budget, the debt, and the plans to eliminate the deficit. I watched a speech, which Obama gave recently at a Virginia University about his plans to eliminate debt and fix budget deficit. The speech was pretty good and I liked most of what I heard him saying. He talked about not cutting anymore from education and about how he thinks we should be adding to education because if it weren’t for loans, grants, and scholarships, most students would not be able to afford their college education, including him and Michelle.

He talked about making health care and Medicaid affordable and attainable for everyone so that people will be able to receive adequate care for their needs. He also talked about wanting to improve our health care services so that people will not feel as though they need to travel far distances to receive quality care, including out of the country. I agree that health care and education should be added to and improved instead of taken away from and crippled. Every student should have the opportunity to go to college and get the help they need. Every human being should be able to count on getting quality health care assistance in their local community.

Why can’t they just make some even cuts across the board, in all areas, instead of finding a few to make huge cuts to; if we made small cuts to each area maybe we could make up some of our losses. Also why can’t the President just use the Treasury Department he has there in DC and print the money we need to pay off our debts, and then start over on a clean slate? I know people say it will affect the value of the dollar, but who controls that anyway? He is the freaking President so he should be able to make those kinds of decisions. And also, stop paying people so much money; why does anyone need to make over one million dollars a year? That is just plain stupid and greedy; take some of that money and pay our debt instead of paying entertainers and athletes.

Making cuts across the board?  Well, some things are mandated by law, while other things are not legal obligations, and the government can decide to decrease funding (discretionary spending). So, when it is time to cut, the cuts are focused in the discretionary spending, and mandatory spending gets very little reduction. Also, some spending is very productive, and helps the economy, so we would like to preserve that and cut the less productive spending. For example, if we could use our education spending to make our population super-smart and hard-working and outstanding in their skills and knowledge, that would make our society much wealthier, and all the spending on education would come back to the government in increased tax revenue and decreases in needs for poor relief. Other spending isn’t so productive, or is actively counter-productive. There are some agricultural and energy subsidies that probably do significant harm to many people, and mainly are useful because they enrich a few powerful and wealthy landowners. So, if we could distinguish between the harmful or wasteful spending and the good investment spending, many of us would like to make selective cuts against the wasteful spending (I’d like to cut defense spending by about 50%, myself).

Another reason why we make deep cuts in some programs and preserve other programs is related to political power.  Some programs enjoy broad appeal, and other programs are controversial.  I think that some of the stuff we as a nation do with international aid is among the best stuff we do. I’m proud of our role in rebuilding Europe after the Second World War, and I’m proud of our work to increase literacy and women’s health in the less materially developed world. And yet, many Americans would like to cut foreign aid, or even eliminate it.  In contrast, there are very few Americans who would cut the levels of benefits in Social Security, since most Americans receive Old Age benefits, or expect to.

The president does not control the money supply.  The Treasury isn’t responsible for creating money.  Money is created by the Federal Reserve Banking system, which is not directly answerable to any politician. If politicians did control the money supply, they could increase the supply, and use it to pay off debts.  However, this would make it very expensive to ever borrow money again.  Also, there would be significant inflation, and inflation can be harmful, especially to banks and wealthy people. When inflation increases, interest rates increase. If you owe money and have a rate locked in, whoever lent you money will lose much of the value of their loan to you if inflation and interest rates go up.  This would not be good for banks. In case you haven’t noticed, the bankers are a very powerful special interest in our society.  The politicians will do very little that harms the interests of the banks or the people who control great wealth. But yes, a decrease in the value of the dollar and a little bit of inflation can be a good thing for American competitiveness, as it will make our products cheaper on world markets, and that may increase demand for services and goods that are produced by Americans.

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