Does America Really Have a Budget Crisis?

To the Teacher: 
 

The US budget deficit and the national debt are under debate in Washington. Lawmakers, particularly conservatives, consistently express alarm about the country’s growing national debt and argue that budget cuts are necessary if the US is to prevent long-term bankruptcy. While the Obama administration has advocated for more modest budget cuts, it also discusses the debt as an urgent national issue. However, progressive lawmakers and economists argue that concern about a “debt crisis” are overblown and Republicans are playing political brinksmanship with the national budget—using concern about the debt as a cover to pursue tax cuts for the wealthy and to eliminate needed social services.
 
This lesson is designed to get students to think critically about hot-button issues such as the "fiscal cliff," "sequestration," and the ongoing debate about the US budget. The lesson is divided into two readings. The first reading examines the general debate about the budget. The second reading discusses the human impact of budget cuts and sequestration. Questions for discussion follow each reading.
 
 


 

Student Reading 1:
Deficit Wars: Does the Federal Government's Budget Really Need to be Cut?

The US budget deficit and the national debt are under debate in Washington. Lawmakers, particularly conservatives, consistently express alarm about the country’s growing national debt and argue that budget cuts are necessary if the US is to prevent long-term bankruptcy. While the Obama administration has advocated for more modest budget cuts, it also discusses the debt as an urgent national issue. However, progressive lawmakers and economists argue that concern about a “debt crisis” are overblown and Republicans are playing political brinksmanship with the national budget—using concern about the debt as a cover to pursue tax cuts for the wealthy and to eliminate needed social services.

Right-wing commentators and politicians point to the country’s growing national debt and argue that spending cuts are necessary to prevent bankruptcy. Top Republicans in Congress have been quick to repeat this argument. House Speaker John Boehner said in an ABC News interview on March 17, 2013, “We have [a debt crisis] looming because we have entitlement programs that are not sustainable in their current form. They’re going to go bankrupt. I would argue that we do need to do something." 
 
By “entitlements,” conservatives mean programs such as Social Security and Medicare. Social Security is a federal insurance plan that almost all Americans pay into; it provides support for them when they retire. Most Americans also pay into Medicare during their working years so that they can have healthcare when they retire.
 
Some of the current debate over federal budget dates back to August 2012, when Congress and the country became embroiled in a controversy surrounding what is known as the "debt ceiling." By law, Congress is not permitted to let the national debt exceed an agreed-upon point. However, as a matter of practice, politicians have long agreed to pass regular extensions to the limit, in order to protect government credit and to signal that the United States will always pay its debts.
 
Last year, however, Republicans in Congress decided to play hardball. They said they would not give approval to lift the debt ceiling unless a deficit reduction plan was put in place. As a result, the two parties agreed in August that if they could not come to a budget deal by January, $85 billion in automatic spending cuts would come into effect. These cuts would include both reductions in military spending (which Republicans tend to oppose) and in social programs (which Democrats seek to protect), and therefore both parties were seen as having incentive to reach an agreement. The threatened cuts came to be known as “sequestration.”
 
Many people used the term “fiscal cliff” to describe what was expected to happen on January 31, 2013, when sequestration was set to take effect and tax cuts passed under the administration of George W. Bush were set to expire. As this date approached, Republicans and Democrats could not come to a final deal, but they did come to a temporary agreement that delayed sequestration until March 1.
 
By March 1, the two sides still could not come together. Congress did pass a resolution to keep the federal government from shutting down entirely until September 30. But the bill did not stop the budget cuts of "sequestration," which are now going into effect.
 
The conservative policy think tank, The Heritage Foundation, argues that the spending cuts enacted by sequestration are not even enough to curb the looming crisis, and deeper cuts are needed. As Heritage's Romina Boccia wrote on a March 1, 2013:
 

Federal spending is projected to grow from $3.6 trillion in 2013 to more than $6 trillion by 2023, a 69 percent increase without sequestration. Even with sequestration, federal spending would still grow by 67 percent. Sequestration barely even slows the growth in spending, let alone cuts any spending out of the overall budget…. Spending continues growing at this massive pace because sequestration leaves the real drivers of spending and debt—the entitlement programs—nearly untouched. In 2013, spending is projected to grow by $57 billon without sequestration and by $15 billion with sequestration.

 
Liberal-leaning economists argue that now is not the right time to address the deficit. When the economy is slow and joblessness is high, cutting budgets only deepens the problem, they argue. In times of economic downturn, the government needs to step in and spend in order to make up for shortfalls in private sector spending. Not doing so only slows, or can even reverse, economic recovery. They point to the experience of several European countries whose budget-cutting “austerity” programs have caused further economic slowdown. Any budget cuts, they say, should be postponed till a time when the economy is growing. Then, increased tax revenues will erase much of the deficit, reducing the need for cuts. And if government does cut jobs, workers can find new ones, because the job market is strong. They note that in the 1990s (during the presidency of  Democrat Bill Clinton), when the economy was booming, the government ran a budget surplus.
 
Economist Paul Krugman argued in a December 13, 2012 op-ed for the New York Times that, rather than a debt crisis, America faces a political crisis, with Republicans using concern about the debt and deficits as a scare tactic to drum up support for cuts to social programs and tax breaks for the wealthy. He wrote:
 

We are not having a debt crisis. It’s important to make this point, because I keep seeing articles about the “fiscal cliff” that do, in fact, describe it — often in the headline — as a debt crisis. But it isn’t. The U.S. government is having no trouble borrowing to cover its deficit. In fact, its borrowing costs are near historic lows. And even the confrontation over the debt ceiling that looms a few months from now if we do somehow manage to avoid going over the fiscal cliff isn’t really about debt.
 
No, what we’re having is a political crisis…. Since the 1970s, the Republican Party has fallen increasingly under the influence of radical ideologues, whose goal is nothing less than the elimination of the welfare state — that is, the whole legacy of the New Deal and the Great Society. From the beginning, however, these ideologues have had a big problem: The programs they want to kill are very popular. Americans may nod their heads when you attack big government in the abstract, but they strongly support Social Security, Medicare, and even Medicaid. So what’s a radical to do?
 
The answer, for a long time, has involved… “starve the beast,” the idea of using tax cuts to reduce government revenue, then using the resulting lack of funds to force cuts in popular social programs. Whenever you see some Republican politician piously denouncing federal red ink, always remember that, for decades, the G.O.P. has seen budget deficits as a feature, not a bug.

 
Many Democrats, including President Obama, believe we should cut the budget now, though not as severely as the Republicans recommend. In April President Obama introduced a budget plan that included cuts to Social Security, Medicare and Medicaid. A statement by the Obama administration about the proposed budget cuts said: “By including this compromise proposal in the Budget, the President is demonstrating his willingness to make tough choices and his seriousness about finding common ground to further reduce the deficit.”
 
Some progressives have criticized President Obama for jumping on the deficit reduction bandwagon. Economist Dean Baker argued in a March 4, 2013 article for the Huffington Post:
 

[T]he only choice in the near term is between larger budget deficits and higher unemployment. The people who clamored for cuts in government spending and lower deficits are in fact clamoring to throw people out of work and slow growth.We will never know if President Obama could have garnered support for more stimulus and larger deficits if he had used his office to pound home basic principles of economics to the public and the media. But we do know the route he chose failed.
 

 Today, as politicians and economists debate the deficit and the debt, ordinary Americans are left to wonder how the budget cuts of “sequestration” will affect them.
 
 

For Discussion: 

  1. Do students have any questions about the reading? How might they be answered?
  2. The debate about the budget uses several technical terms. What is meant by the “fiscal cliff”? What is meant by “sequestration”?
  3. Why do conservatives think that addressing the budget deficit should be a priority? Why do liberals say that now is not the right time to cut federal budgets?
  4. What do you think? Is addressing the deficit a legitimate priority or is it being used as a pretext to pursue other political goals?

 
 
 



 

Student Reading 2:
The Human Impacts of “Sequestration’s” Budget Cuts

Often, when politicians and media commentators discuss federal spending cuts like those of the “sequester,” the conversation is very abstract, which makes it hard to appreciate the human impact of the cuts. The reality is that these spending cuts can have a profound effect, especially on poor and working class Americans.
 
Republicans such as Congressman Paul Ryan, the chairman of the House Budget Committee, have attempted to minimize the potential harm sequestration is expected to cause average Americans. When asked in a March 3, 2013, television appearance if he thought the cuts would cause pain for the American public, he stated: "I think it's overstated because we will [this] week give the president latitude to better direct the cuts to low-priority spending and the more wasteful programs instead of the across the board.” 
 
But Ryan’s assessment of the impact of sequestration is at odds with the on-the-ground reality many Americans face. Philadelphia is one city that serves as an example of how these cuts will filter to the ground level.  In a March 12, 2013, article for NextCity.org, journalist Jake Blumgart described the wide-ranging effects that sequestration will have in that city:
 

Under sequestration, 9 percent of the discretionary non-defense budget will be hacked away in seven months (Fiscal Year 2013 ends on September 30), which includes huge swaths of funding for programs such as affordable housing, low-income education, child care, nutritional assistance for pregnant women, mental health services and assistance for the homeless. No one seems clear how quickly these cuts will be implemented. But from the local level in cities like Philadelphia, at least, they’re being anticipated as anything but boring.
….
“The School District of Philadelphia has already gone through a couple years of cutting budgets, so we are down to the bone,” said Fernando Gallard, the district’s chief of communications. “[We] don’t have taxing authority, so we have to deal with cuts by reducing expenditures. That’s the only way the School District of Philadelphia is able to deal with it. It will hurt….”
 
The sequester will also hit affordable housing and homelessness assistance, cutting $938 million, nationally, from the Housing Choice Voucher program and snatching $96 million from homelessness assistance programs (a little more than $5 million will be lost in Pennsylvania)….
 
The sequester seeps into almost every area where federal grant money is concerned. Thousands of women and children in Philadelphia will lose nutritional aid from the Special Supplemental Nutrition Program for Women, Infants, and Children. Substance abuse treatment and domestic violence services will lose federal money, too, even though both of these essential supports have been struggling to meet demand and losing other sources of funding in recent years.

 
 
According to many polls Americans oppose many of the budget cuts being proposed. For example, a CBS poll in March 2013 found that about 80 percent of Americans opposed cuts to Social Security and Medicare. Despite this, politicians from both political parties voice support for such cuts as a necessary step in reducing the budget deficit.  If there is going to be a pushback against these cuts, it will likely need to come from outside the nation’s capital, from those who are most affected.
 
 

For Discussion: 

  1. Do students have any questions about the reading? How might they be answered?
  2. Why do conservatives such as Representative Paul Ryan think that the budget cuts of “sequestration” will not be particularly painful for Americans? What do you think of this argument?
  3. What are some of the programs that will be cut back as a result of sequestration?
  4. Do you think that sequestration cuts could affect you and your family directly? How so?
  5. Does the question of addressing the federal deficit and debt affect all Americans equally? What do you think about this?