Introduction
Lately, the United States has been trending on a wrong path occasioned by their current budgetary hurdles. The current federal spending and debts are considered to be too high that it will take numerous generations to clear the debt. This is further complicated by the projections given on future spending and debts. The spending and debts are projected to rise by more than two-fold, largely due to increased entitlement spending. It is, therefore, clear that the current American economy will lead to the stagnation of future generations. A variety of academic research has pointed to the likelihood of the United States as well as other major economies shrinking, especially when the public debt reaches the dreaded 90 percent level of the Gross Domestic Product (GDP). Moreover, the ever-rising public debt has potential consequences on the interest rates that are also projected to increase exponentially as a result of this. The increase in interest rates is expected to hurt private investments and consequently raise the inflation levels (Farnsworth and Irving, 2011, pg. 16). This means that future generations will be severely bruised economically, especially the poor, middle class, and the elderly. It is, therefore, the high time the United States policy makers made prompt decisions to save the country from a fiscal turmoil like happened to Greece and Japan.
As a matter of fact, the United States federal spending in 2013 is currently on track to give a massive financial deficit of approximately US$ 850 billion. This is further aggravated when combined with depressed receipts coming from an already weakened economy. It is further predicted that by 2023, the United States chronic debts and deficits will have reached alarming levels of 87 percent of the US economy; a scenario that will result to an ultimate halt to the US economy. As at now, an analysis carried out on the United States economy has confirmed serious levels of economy overburdening and gradually slowing economic growth, which pose numerous harmful consequences in the abilities of the US to respond to unexpected challenges.
The federal government has quickly exhausted its bill management strategies leading to the soaring of its debt to statutory debt ceiling levels. This has in turn raised serious debate and concerns in the Congress. However, the debates in the Congress seem to be an empty talk since nothing has been done to cut the government spending now and in the long term. The debates fail critically to address the issue of coming up with prudent reforms that address America's entitlement plans. America’s vulnerable path to the current economic challenges started in the famous contentious debate in 2011, when the US President Barack Obama and the United States Congress consented to increasing the federal debt ceiling to US$16.39 trillion from the previous levels held at US$ 14.29 trillion. This was to be achieved in exchange for certain reductions that were to be specified over a term of 10 years. The increments were done in three installments, but unfortunately, the United States economy lost its earlier strong rating of AAA from Standard & Poor’s – a rating that had seemed permanent for the federal government. This was the first step that served to confirm the country’s dangerous budget path.
The rating spelled two challenges for America: (a) the country’s debts and spending are abnormally high, and (b) the country’s future public debts and spending are projected to rise further, resulting in an economic stagnation. Further complicating these trends are the yet-to-be-funded major entitlement plans like Social Security and Medicare. These unfunded programs paint an even gloomy picture on the future of America’s economy considering that they are the country’s obligations. Economic, as well as demographic aspects, are seen as continually driving Social Security and Medicare spending to alarming levels that foretell economic obscurity for America’s future generations. Essentially, the above entitlements as well as the interest on debts have been calculated and found to eat up on all revenues - as a result of tax – in a time period less than that lived by a single generation. This confirms that it will not even take numerous generations before America’s problems erupt resulting in the stagnation of the economy (Greenlaw, 2013, Para 7).
As has been observed, the major entitlements in America cover multiple generations; it would, therefore, be crucial to assess their sustainability so that the implications are understood. Interestingly, the unfunded programs (Medicare and Social Security) constitute a combined figure exceeding US$48 trillion. This has been over a time horizon of almost 75 years. Adding the unfunded obligations from Medicaid and veterans’ benefits would adversely affect the already gloomy picture of the economy since they add more trillions to the debt pressure (Boccia, 2013, Para 5).
Recently, the Congress and the President have been on the limelight for failing to address issues regarding the neglect of the American budget order. The order stipulates the guidelines for institutional schedules to assess federal spending as well as allocating the taxpayers’ money prudently. From previous records – a record that undermines the American economic dream – Congress only budgets when circumstances force it to do so. Considering this record – and the fact that they have already pushed the debt ceiling forward – it is most likely that American future generations stand in the face of obscurity regarding their economy and potential stagnation of it.
Works Cited
Boccia, Romina. "How the United States’ High Debt Will Weaken the Economy and Hurt Americans." The Heritage Foundation, 2013. Web. 24 Nov. 2014.
Farnsworth, Kevin, and Zoë Irving. Social Policy in Challenging Times: Economic Crisis and Welfare Systems. Bristol: Policy Press, 2011. Print.
Gern, Klaus-Jürgen, and Nils Jannsen. Do We Face a Credit Crunch? Kiel, 2009. Internet resource.
Greenlaw, David. Crunch Time: Fiscal Crises and the Role of Monetary Policy. Cambridge, Mass: National Bureau of Economic Research, 2013. Internet resource.
