Bush Tax Cuts: To Expire or To Extend?

In case you didn’t know, the national debt of the U.S. is now projected to reach $13 trillion in the year 2018 which is about 65% of the gross domestic product that America produces. Way back in 2008, it was estimated that the national debt will only reach about $5.1 trillion by the year 2018. There is a huge difference of about $8 trillion which clearly emphasizes the struggle faced by the nation today compared to years back. A ballooning budget deficit along with an underperforming economy might still increase to these figures to unimaginable proportions.

The reason for such increase in national debt is the fact the America is known for having relatively high budget deficits. According to the Budget Office, the deficit for fiscal year 2010 is $1.3 trillion which is already 10% of America’s GDP. Because of this, fears of a larger deficit have hampered government spending especially on social services. The recent economic recession was blamed for the lower tax revenues collected by the government.

The public and business sector can’t stand to see the government accumulating more debt. Very high interest rates are the result of the loss in confidence by the financial sector to the government. The consumers are the ones who are directly affected by the poor decisions undertaken by politicians. In order to bring back investor and consumer trust and confidence, the government should put better transparency unto its programs and work to restore the healthy growth of the economy.

Another major issue today is with regards to the extension of former President Bush’s tax cuts. This bill granted tax discounts to large companies in order to boost their profit and create more jobs for the public sector. According to the budget office, the extension of the tax cuts will cost the government another $2.3 trillion in total debt. The assumption that tax cuts will trigger economic growth by increasing consumer spending is in fact a fluke. People prefer to save money for future use rather than spend most of it.

Pres. Obama’s version calls on the extension of tax cuts but only for people who earn not more than $250,000 per year. The good side is that it will only give tax discounts to people who really need it. In a country where over 50% of the total wealth resides only with the top 10% of the income list, several measures should be undertaken to ensure that proper distribution of wealth is guaranteed. While it is still best to permanently let the tax cuts expire in order to generate revenue for other better stimulus programs, letting some tax cuts to continue will still be effective as long as provisions will be established to automatically remove them when unemployment levels normalize.