The discussions continue, new proposals are floated, old ones are revived, but there is still no agreement while the deadline, August 2, is rapidly approaching when the U.S. can no longer pay its expenses without the debt ceiling being raised.
Lots of talk about a balanced solution, about spending and cuts and taxes. What is then the state of the U.S. economy? Has the U.S. spent too much? Are taxes too low? These are questions that Factcheck.org. tries to answer in a recent study.
Here are some excerpts:
U.S. federal spending is the highest since World War II, while incomes are the lowest in more than 60 years. In figures this means that spending represents 24 percent of GDP, while the federal revenues dropped to 15 percent of GDP.
This has resulted in a budget deficit of 10 percent of GDP, the largest deficit since 1945.
Tax cuts and America’s wars in Iraq and Afghanistan are the reasons behind the large deficit.
Federal income tax receipts have dropped sharply since the tax cuts under George W. Bush, from 10 percent of GDP to 6 percent today.
Today, the U.S. borrows 36 cents of every dollar spent.
Of federal spending, 20 percent goes to Social Security, 13 percent to Medicare, and 8 percent to Medicaid, while 20 percent goes to defense. Foreign aid accounts for only 0.9 percent of total federal spending.
All this points to a serious imbalance in the U.S. economy. How, if at all, can Washington solve this problem? That is today’s big question.