1997-1998 Harry Singer Foundation National Essay Contest

The Budget Process and the National Debt 

Iowa-Grant High School, Livingston, Wisconsin
1st Gina Walejko           2nd Rachel Wachter        3rd Jody Berg

"The Budget Control Act of 1974 changed the fiscal year of the federal government so it runs from October 1 to September 30 and set up a timetable for when the President, the committees, and Congress had to submit their resolutions and pass the budget."
Vanessa Vesperman, Iowa-Grant High School, Livingston, Wisconsin

"Each Congressman has a favorite program they won't see cut. And each American doesn't want to see the program they most benefit from get cut, so it's hard to get anything accomplished…Congress needs to forfeit their popularity and do what's best to expel the national debt."
Shannon Small, Iowa-Grant High School, Livingston, Wisconsin

"About 41% of the Federal Government's revenue come from individual income taxes. That is equal to about 8% of the GDP and has been estimated to be $691 billion in 1998. About 33% come from social insurance payroll taxes, which is the fastest growing segment of Federal revenue. These involve Social Security taxes, Medicare taxes, unemployment insurance taxes, and Federal employee retirement payments. Corporate income taxes, which account for 11% of the Government's revenue, have consistently shrunk as a percentage of GDP. The rest of the revenue collected is split between excise taxes and other miscellaneous taxes such as fines, custom duties, etc.

This brings us back to one of the simplified solutions of raising revenue to control the national debt. All of the divisions of taxes described above can be raised to increase revenue, but the President and Congress need to choose which division can be increased. The American people generally hate tax hikes, and the politicians hate displeasing the public. The public and the politicians are at fault in this area because politicians are too busy looking out for their own personal popularity, and the American people, while complaining about the national debt, don't want their taxes to be increased. So these much-needed tax increases never take place."
Shannon Small, Iowa-Grant High School, Livingston, Wisconsin

"Clinton will offer some tax breaks for his budget for the 1999 fiscal year, but they will be modest. The plan includes a break to middle-income people for day care expenses and energy conservation costs. The tax cuts would be paid for by closing corporate tax loopholes and eliminating some subsidies. The tax breaks can't be that great though or the national debt will never be resolved because to get tax breaks people have to give something else up which, of course, many people don't want to do. They want the best of both worlds, to have lower taxes and still receive all the benefits of paying higher taxes."
Chelsie Ritchie, Iowa-Grant High School, Livingston, Wisconsin

"The Social Security system is now building up reserves. By 2019, these reserves will be nearly $3 trillion. However, after that, as the majority of the baby boomers move into retirement, it would be necessary to draw down the reserves under the present law. Although, it is very likely Congress will act to support Social Security's finances by reducing benefits or increasing revenues before then and causing the reserves to grow larger and last longer than the 2019 year indicated under current projections. This increase in the reserves while most baby boomers are still working, and drawing down of the reserves after the baby boomers retire, is corresponding to what families do by saving for retirement during their working years and drawing down their savings after they reach retirement. If the Social Security surpluses were to be used in the next two decades to increase national saving rather than to offset the deficit in the rest of the budget, that would…enable the country…to support the baby boomers when they [retire]. To do this, the deficit in the non-Social Security budget would need to be reduced significantly or even eliminated and further reforms in Social Security would need to [occur] to restore [the system] to actuarial balances.

Unfortunately, [under] the version of the balanced budget amendment coming before Congress…total government expenditures in any year, including expenditures for Social Security benefits, could not exceed total revenues collected in the same year, including revenues from…payroll taxes.

The budget would be considered balanced when the deficit outside Social Security exactly offset the surplus inside Social Security. However, when that happens, the main purpose of accumulating a Social Security surplus [is threatened]. The benefits of the baby boomers would likely have to be financed in full by the taxes of those working in the years the baby boomers are retired. This version of the balanced budget amendment would undercut some of the central achievements of the 1983 Social Security reform.

A reason the amendment would have this effect is because even though the Social Security trust funds would have been accumulating large balances, drawing down any part of those balances when the baby boomers retired would mean the trust funds were spending more in benefits in those years than they were receiving in taxes. That would result in great deficit spending. This deficit spending could be offset by a corresponding surplus in the rest of the budget. Achieving such a large surplus in the rest of the budget would be an unachievable task, especially since Medicare and Medicaid costs will also rise when the baby boomers retire.

Also, under the balanced budget amendment, reductions in Social Security could be used to help Congress and the President balance the budget when they faced a budget problem. This could lead to too little being done to reduce or eliminate deficits in the non-Social Security part of the budget and unnecessary benefit reductions in Social Security.

At first, that may seem politically questionable. The balanced budget amendment is likely to lead to periodic mid-year crises, when budgets thought to be balanced at the start of a fiscal year fall out of balance during the year as a result of the extremely slow economic growth. Because of all the reductions to Social Security and other programs, I am against the balanced budget amendment. It seems like it still needs quite a bit of work to improve it, without cutting too many programs.

One program highly in need of reform is Social Security. According to a report in 1996, starting in 2012, the taxes paid into Social Security will no longer cover the benefits going out as millions of baby boomers begin retiring. There are several opinions as to how to fix this program, such as investing some of the money in the trust fund in the stock market, which has a present return rate of 10 percent. Some skeptics fear that if politicians objected to investing in these index funds, they would find ways to direct the dollars toward favored industries.

Another alternative reform is to adjust the Consumer Price Index to minus one percentage point, which will greatly affect the cost of living adjustment standard. Some do not believe the CPI truly measures the COLA correctly to begin with. It may understate inflation because older people are big consumers of health care, and medical costs have been rising faster than other prices. A shift to minus one would definitely affect older people. The cost of living adjustments would be considerably lower, and that would mean less money in Social Security recipients' pockets."
Denise Gard, Iowa-Grant High School, Livingston, Wisconsin

"Today, politicians are so caught up in getting re-elected that it can cloud their minds. Too often, a necessary tax increase has been left until later because no one wanted to be known as the person who voted for the increase…Not only the politicians, but the voters also need to get some priorities straight. The Congressmen have good reason to be afraid of voting for a tax increase since almost everyone wants a tax decrease instead. Most voters wouldn't think twice about voting against someone who raised their taxes. [Voters] need to realize that the tax increase would benefit them in the long run. If Americans supported politicians who were trying to reduce the debt, even if they used tax increases and spending cuts, then politicians would be more willing to work at reducing the debt."
Vanessa Vesperman, Iowa-Grant High School, Livingston, Wisconsin

"What do Americans think of Social Security these days? Most have given up on the program. More young people believe in UFOs than the idea of receiving a Social Security check when they retire, which leaves them to wonder why they are even paying taxes for Social Security when they won't receive any when they are at retirement

Today, there are three workers for every retiree. By the time the 76 million baby boomers, which includes us, begin to retire there will only be two. This is kind of scary, knowing that I may not receive a social Security check when I retire and it makes me wonder what the government will do about it to make sure that we do get something.

The latest commission looking for ways to rescue the Social Security system has decided the government is incapable of fixing itself. The blue-ribbon panel suggested that they invest up to half of the taxpayers' money in the stock market. Of course, this is fine as long as you believe that the stock market is only going to go up.

Social Security's problems are, in fact, not as bad as generally imagined. Overall, government entitlement programs-from federal pension to the ever-more-expensive Medicare, are out of control, but Social Security can be fixed relatively painlessly, according to what some people think…[One] step could include raising the taxes on benefits for wealthier recipients and pushing the age of eligibility higher than is now planned."
Chelsie Ritchie, Iowa-Grant High School, Livingston, Wisconsin

"In one of the local newspapers it said, 'Chronic overspending by the federal government is fiscal child abuse…It is our children's future vs. Washington's spending addiction.' "
Laura Cook, Iowa-Grant High School, Livingston, Wisconsin

"'Do not cut Social Security or Medicare,' say the elderly.
'Don't touch interest rates, ' argue the baby boomers.
'Please don't reduce farm subsidies,' plead farmers.
'Fix the debt!' they all yell.

There are two sides to every argument. The environmentalists do not need defense and the military doesn't need national parks. The elected officials in the federal government are being pounded from every side to reduce the debt, but no representative or senator is willing to take a stand…Politicians need to realize that they cannot do their jobs and please everyone…I think that politicians must cut all government spending a little bit. Then everyone will feel the pinch. No certain group will be able to whine that they are the neglected minority. I feel that senators and representatives would be willing to reduce government spending this way because it is the safest way for them to be re-elected. Since they cannot please everyone, they must affect everyone equally. I may seem to be hard on the politicians, but I think that I must be even harder on United States citizens. The uneducated, angry voters cause our elected officials to act the way they do.

I have learned many things in my high school government and economics classes, but the biggest thing I have been taught is that you cannot please everyone, and the government falters because of this. If voters realized this, politicians would be able to be more productive in their jobs, and this would benefit the whole.

I am not advocating that Americans should roll over and die. I believe that they should vote for whom they believe will represent them the best. This is the only way the majority will be expressed and democracy will succeed. I do believe, however, that [citizens have a] duty to [learn] how their government works. They must [realize] that they cannot be in the majority 100 percent of the time. Most voters feel that agreeing with their own representatives and senators on every vote is the right thing. [That reasoning explains] Congress's urgency to please everyone.

The only way that I can see American citizens will realize this is through education. I believe that every teenager in America should be required to [learn] about their own government. [Educated] voters [should] be able to help our country, eliminating our national debt. These new voters [will see] that the politicians' urge to please all voters…stems from voters, themselves. As I approach eighteen, I realize that an understanding relationship between representatives and citizens is the basic responsibility for every voting American [and is the way to getting] the national debt reduced.

In a recent survey, around eighty percent of interviewed citizens felt that a balanced budget amendment was a good idea, but when informed that this might lead to higher taxes or cuts in programs like Social Security and Medicare, support dropped to around thirty percent. Obviously, citizens do not realize that the budget must be balanced in order for our national debt to be reduced, and [that] in order for the federal budget to be balanced, spending in programs must be cut. I feel that a constitutional amendment for a balanced budget, with exceptions in times of war or extreme depression, is the only way that…[will be balanced].

Around fifteen percent of the federal government's money goes to paying off interest toward the nation's debt. Nothing is created. No food is put in starving children's mouths. No jobs are given to one-income families. No highways are constructed. Every year this percentage of wasted government money rises. In several years, one-third of the government's money could go toward nothing. We must balance the budget.

The Constitution is our nation's backbone. It is sacred, righteous, and makes the United States of America different from other countries. If the balanced budget amendment [had] passed and then added to the Constitution, it would have been upheld. Less pork-barrel legislation would have been able to be passed. The government would have had to balance the budget without citizen's approval. In order for the balanced budget amendment to be successful certain clauses must be added. The government must set strict guidelines for times when the nation can have a deficit, including times of war, depression, and extreme inflation, yet these clauses must not be open-ended or the balanced budget amendment could turn into our Constitution's first blunder.

In retrospect, politicians must be willing to give up votes to make our government solve its national debt problem. Our elected officials must be willing to cut programs. In order for this to work, citizens must become educated and they must realize that they will not always be pleased. The balanced budget amendment would help force politicians, without voter's support, to stop deficit spending and, in turn, reduce and, quite possibly, eliminate our national debt."
Gina K. Walejko, Iowa-Grant High School, Livingston, Wisconsin

"The government supports many social programs and each program seems necessary to the people it helps and their lobby groups…Government spending not only helps people through social programs, it also helps businesses continue running by keeping up aggregate demand. As demand increases, businesses…hire more people, so government spending indirectly helps people stay employed. Deficit spending seems to do more good than harm."
Vanessa Vesperman, Iowa-Grant High School, Livingston, Wisconsin

"Economists generally believe the best level for our National Debt is zero-that is, that the nation has no debt at all. They also believe we must balance the budget each and every year. If our national debt is considerable, we must tighten out belts, sacrifice, increase taxes, and do whatever is necessary so we can show a surplus, and get that national debt down to where it belongs, even if it necessitates a higher unemployment rate and nipping a boom in the bud! I will try to show that all of the above is quite wrong.

When the government spends more than it receives…it must borrow money from other sources…The government borrows money by selling bonds to banks, individuals, and other investors. The bonds that the government borrows will eventually be paid back. The government bonds that are sold are simply IOUs that require the government to pay back the money to the investors along with interest.

Government bonds are considered the safest of all possible investments because the government can raise the necessary funds to repay the borrowed money when bonds come due. It can also raise the money by selling new bonds. If enough money is not collected this way, the government has the power to raise taxes…

Over the years, the government has accumulated a very large national debt…Some people are fearful that if the national debt becomes too large, [we] will become bankrupt. But this is not possible…because [the nation] has revenue-raising powers. If the government needs more money, it may sell more bonds or raise taxes…It is true that we are passing the national debt onto future generations. But it is also true that the ownership is also being passed on. Many different solutions to the national debt have been formulated, but none have ever really been put into full effect.

Just recently, President Clinton and Congress proposed a balanced budget…There would be no need to borrow money if there was a national debt. If there was a surplus in revenues this money, it is said, could be used to pay back part of the national debt. But, most likely, senators and representatives will want to take any surplus money back to their home states.

In today's society, most of the voting population is centered around the baby boomers [who] …pay a good portion of our…taxes…it is most likely these people would reap the benefits of a balanced budget. Attempts to pass a constitutional amendment requiring Congress to balance the budget started during the Great Depression. Since then, Congress has been introduced to 11 balanced budget amendments. Each time the proposed amendment failed to get a two-thirds majority vote in both houses, which is necessary for a constitutional amendment to be sent onto the states for ratification.

Contrary to what many Americans believe, the nation's track record in limiting deficits to lower levels is good. A recent Congressional Budget Office analysis shows that if deficits are kept to modest levels in the future, the economy will grow at a solid rate and future generations will be better off than current generations…The deficit had declined from 5.1 percent of the Gross Domestic Product in 1986 to 1.4 percent in 1996. The claim [that] the policy makers will only balance the budget if a constitutional amendment requires them to do so is, as of now, being proven incorrect. For more than 200 years, the nation strove to keep deficits small or non-existent except during wars or recessions. The only other time in the past 200 years that the government has adopted policies that made the deficit larger was during the early Reagan years. When it became clear that these policies were not working, Congress and three administrations spent the rest of the 1980's and 1990's pushing the deficit back. This progress was achieved without a constitutional requirement…The Congressional Budget Office did a study where deficits were held to approximately 1.5 percent of the Gross Domestic Product through 2030. The CBO projected that under such a policy, total income per person would grow 41 percent between now and 2030, after adjusting for inflation. The CBO also projected that if the budget were balanced each year through 2030, average income per person would rise 43 percent. This new finding illustrates the fallacy of the claim that the balanced budget amendment is needed to save us from an 'economic meltdown' and a deterioration of the living standards of future generations.

Strong action is needed to reduce the long-term deficit. But a constitutional amendment requiring a balanced budget is not a sound way to achieve this goal. It is neither necessary nor wise, from the standpoint of keeping the economy strong, to have the Constitution mandate that the budget never be in a deficit in any year."
Rachel Wachter, Iowa-Grant High School, Livingston, Wisconsin

"Today there are about as many theories about ways to control the national debt, as there are hairs on a dog's head. Almost everyone, from an average person to the most powerful Congressman, has a hypothesis relating to the national debt. What we need is to hear all these ideas and make a compromise."
Shannon Small, Iowa-Grant High School, Livingston, Wisconsin
"In this balancing act, even when the federal budget starts showing a surplus, the gross national debt will keep going up as the government borrows from one place to pay off another. That money will have to be repaid beginning in about 14 years, when the cushion of surplus Social Security revenues won't be available to offset other spending. The broadest measure of the national debt now nearly $5.4 trillion is projected to increase to $6.8 trillion in 2005 because of borrowing from trust funds designated for future costs. So amid the debate over spending future surpluses is [the fact] that there really won't be any."
Chelsie Ritchie, Iowa-Grant High School, Livingston, Wisconsin

"The word 'debt' has a bad stigma attached to it. Why? I can't wait to get into debt. My family is in debt. I'm not worried about a silly little word like 'debt,' neither is my family. As long as your debts do not exceed your assets, debt is a good place to be in. The same is true for a nation such as the United States. In the U.S., assets outnumber debts. As long as our GDP grows more in a year than our national debt, the U.S. will be okay."
Jody Berg, Iowa-Grant High School, Livingston, Wisconsin

"An accrual accounting system [books] the government's revenues and liabilities as they are acquired rather than when…paid…The cash-basis accounting doesn't account for the depreciation of assets and assumes that all assets are in mint condition until they are no longer used. The accrual accounting would depreciate assets so the government would know the true value of them."
Vanessa Vesperman, Iowa-Grant High School, Livingston, Wisconsin

"Many economists do not like the idea of a balanced budget amendment. They believe it would not allow Congress and the President to boost the economy in a recession…The opposing economists say that if the borrowing is to build a new mass transit system or improve air traffic control, hospitals, or prisons, then that is not bad. It is time to start worrying if the government is borrowing to pay pensions for retired public employees. Under the balanced budget amendment, when the economy [deteriorates], the government would have to cut spending or get a three-fifths majority vote in order to raise taxes or run a deficit. The amendment would prohibit the government from spending more in one year than it collected in revenue in that year."
Laura Cook, Iowa-Grant High School, Livingston, Wisconsin

"When people on the street are asked if they would like a balanced national budget, an overwhelming number of people say, "Yes." However, when they find out the details, the majority of the people say, 'No.'"
Jody Berg, Iowa-Grant High School, Livingston, Wisconsin

"Keynesian economics state that if a recession is bogging down the economy, the government in the form of government spending must take action. This would stabilize the GDP. This action might be delayed because Congress usually is very cumbersome in taking votes. If that would happen, the recession would keep spiraling down and down into depression. Another con would be that if the balanced budget amendment were to be passed it would be pretty much permanent because only one other amendment was revoked, and that amendment took several years to revoke. That means [that] if the balanced budget amendment was to be passed and it were a total mistake, it would probably take several years for it to be revoked."
Matt Boyd, Iowa-Grant High School, Livingston, Wisconsin

"The federal budget is a plan for how the government spends your money. You need to know what federally funded activities you can be involved in: Where your money is going. Why you need to pay your taxes…[People can't] complain without making an effort to change what is making them upset. To be updated on the issues and to voice our opinions are great privileges we need to exercise. In conclusion, the budget process and the national debt are complicated issues…The national debt is a problem that needs to be solved so it isn't a burden on future generations. The budget process needs to be clarified for all of the American people."
Shannon Small, Iowa-Grant High School, Livingston, Wisconsin

"Like a lot of businesses that run on debt, the government is doing the same thing as them. Many companies borrow money to expand or grow. In the case of the government, it is no different. The government borrows to fund public programs that give jobs to hundreds of people, and if the government was to just start cutting programs, those people would lose their incomes and the businesses those workers shop at would lose money and so on.

By borrowing large amounts of money, the government takes away from businesses. When the government wants money, people buy bonds because they are a safer investment than buying stocks. But when there is less money invested in the stock market, companies cannot hire more people or maybe they have to lay off large numbers of people. This hurts the economy because those laid-off workers will not contribute to the economy since they have very little money. And when banks invest in the government they have less money to loan to their customers. This decrease in funds increases interest rates on loans and then people will not borrow money for something they had planned on buying that would help the economy.

In conclusion, I think that the national debt in moderation is not such a bad thing. A huge national debt would take money from potential investors and slow growth in a lot of companies. It's bad because it is so huge that even the interest that is paid on it is phenomenal. But one good thing about the national debt and the budget deficit is that it is a sign that the government is spending money, which helps the economy."
Greg Vondra, Iowa-Grant High School, Livingston, Wisconsin

"The only way the debt could get out of control is if it began growing faster than the economy is growing. At this time, the debt is not posing a threat to America and is actually helping our economy grow. It would cause more problems to reduce the debt than continue government spending as it has been. At this time, it is probably in America's best interest to continue government spending, but try to keep the debt from expanding at dangerous levels."
Vanessa Vesperman, Iowa-Grant High School, Livingston, Wisconsin

"Most federally funded programs benefit us all whether we know it or not. People scoff at welfare and unemployment, how it is a waste of their money but we need these programs to keep the economy rolling. Without these programs, the burden of the poor would fall onto private charities that the public would have to donate to. I would rather pay taxes to institutions that will deal with your money fairly and equally. Not all people would get an equal chance for unemployment and welfare if it were left to private charities. I believe that we need the government, and with having a government, we must pay to keep it going."
Leah McCann, Iowa-Grant High School, Livingston, Wisconsin

"A surplus would…help corporations and businesses wishing to sell stocks and bonds. By paying off all of its debts, the government would no longer need to borrow money to pay interest. As long as no emergency occurred the government wouldn't need to offer bonds, so people interested in investing [and] who would normally buy government bonds would look to Wall Street instead."
Sam Marcum Iowa-Grant High School, Livingston, Wisconsin

"There are many, many wealthy people in the U.S. that have money they will never spend in their lifetime. They should put that money to good use. Donate more money to programs such as education and programs that help the needy. If everyone, not only the wealthy, did this, the government could be relieved of some of its burden. It would be able to cut back on some programs without hurting them.

People need to start saving more money as individuals. If the time comes when the nation suffers a recession, we as people will be able to afford it. The government would not have to spend as much money to help the nation get back on its feet if we help ourselves. The government would not have to spend as much on unemployment and food stamps. That money could be used for programs to improve the economy. There needs to be a compromise between the government and the people of the United States. The government cannot always be there, holding the hand of every one of us in the United States. We need to start taking more responsibility for ourselves. Be wise with our own money. Stop arguing with the [Congress] when it says it needs to raise taxes…[On the other hand, Congress] needs to stop spending outrageous amounts of money on things. It needs to say, 'Okay, we'll cut defense spending when the Pentagon says we don't need any new planes this year.' To achieve a balanced budget, the people and the government of the United States need to work together."
Jody Berg, Iowa-Grant High School, Livingston, Wisconsin

"The 'pay-as-you-go' method, which was devised under President Bush, created another hardship for those creating the budget. Those who proposed new spending on entitlements or lower tax rates were forced to offset the costs by cutting other entitlements or raising taxes. This method was devised to limit discretionary spending and force proponents of new entitlements and tax cuts to develop ways to finance them. This method of controlling the debt often creates a split. Some people benefit from federal programs that were expanded while the other programs were reduced or cut. Also, the only way to create or add to a program without hurting other programs would be to raise taxes."
Leah McCann, Iowa-Grant High School, Livingston, Wisconsin                                                      Back