With the national debt projected to grow to average of nearly 100 percent of the GDP by the end of the decade, President Obama needed to find a way to combat this as most economist would find this number very problematic. This current fiscal path would not be sustainable and will drive up interest rates for all borrowers making it more expensive for business owners to raise capital and create jobs. The higher debt will cause the government to spend more money on interest payments making less available for other priorities. If the worst were to happen, investors could lose confidence in our nations ability or willingness to repay its loans which in turn could possible trigger a debt crisis. If actions weren't going to be taken to reassure
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Also with looking into the future, the retirement of the baby boomers and continuous rise in health care could only further worsen the situation. In addition to the debt problems, there was a budget that focused too much on consumption at the cost of important investments and a tax code which was to complex that lead to housing bubbles and health care cost growth. In December 2009, the debt ceiling had been exceeded. To avoid default, the treasury department used what they called extraordinary accounting tools to enable the treasury to make an additional $150 billion available to meet the necessary obligations. This increased debt ceiling was signed into law in early 2010 by president Obama and the debt ceiling was increased by $1.9 trillion. With the debt crisis only getting worse, Obama reached out to former White house chief of staff Erskine Bowles and …show more content…
The first of these elements were discretionary spending cuts. With this the plan proposed to impose tough discretionary spending caps to force budget discipline. To do this it recommended significant cuts in both security and non-security spending by cutting low priority programs and streamlining government operations. They offered more than $50 billion in immediate cuts to lead by example and total of $200 billion per year in illustrative savings. The next element was a comprehensive tax reform. This called for sharply reducing rates which broadens the base, simplifies the tax code and reduces the deficit by reducing spending through the tax code, also known as tax expenditures. It will also reform corporate taxes to make America more competitive again and reform cap revenue to avoid excessive taxation. The third part of the proposal called for a health care cost containment. This included a strict budget of GDP plus 1 percent for health spending as well as specific medium term reductions. It will also replace the phantom savings from scheduled Medicare that were never going to materialize and those from a new long term care program that is unsustainable with common sense reforms to physician payments, malpractice reform, acceleration of successful payment reforms, increased prescription drug discounts and reductions in government subsidized medical education. Fourth, the plan proposed
Also with looking into the future, the retirement of the baby boomers and continuous rise in health care could only further worsen the situation. In addition to the debt problems, there was a budget that focused too much on consumption at the cost of important investments and a tax code which was to complex that lead to housing bubbles and health care cost growth. In December 2009, the debt ceiling had been exceeded. To avoid default, the treasury department used what they called extraordinary accounting tools to enable the treasury to make an additional $150 billion available to meet the necessary obligations. This increased debt ceiling was signed into law in early 2010 by president Obama and the debt ceiling was increased by $1.9 trillion. With the debt crisis only getting worse, Obama reached out to former White house chief of staff Erskine Bowles and …show more content…
The first of these elements were discretionary spending cuts. With this the plan proposed to impose tough discretionary spending caps to force budget discipline. To do this it recommended significant cuts in both security and non-security spending by cutting low priority programs and streamlining government operations. They offered more than $50 billion in immediate cuts to lead by example and total of $200 billion per year in illustrative savings. The next element was a comprehensive tax reform. This called for sharply reducing rates which broadens the base, simplifies the tax code and reduces the deficit by reducing spending through the tax code, also known as tax expenditures. It will also reform corporate taxes to make America more competitive again and reform cap revenue to avoid excessive taxation. The third part of the proposal called for a health care cost containment. This included a strict budget of GDP plus 1 percent for health spending as well as specific medium term reductions. It will also replace the phantom savings from scheduled Medicare that were never going to materialize and those from a new long term care program that is unsustainable with common sense reforms to physician payments, malpractice reform, acceleration of successful payment reforms, increased prescription drug discounts and reductions in government subsidized medical education. Fourth, the plan proposed