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US Budget Issues and Social Security - Term Paper Example

7 pages
1865 words
George Washington University
Type of paper: 
Term paper
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Reasons behind difficulty in getting an agreement on a budget deal

In the US congress and senate, the majority side is constituted by the Republicans and the minority by the Democrats. Chuck Schumer and Mitch McConnell are minority and majority leaders in the Senate respectively. The budget is a sensitive issue to both the majority and the minority as this is the process that will ensure the president delivers to his promises and also gives the Democrats who are the minority the chance to ensure that their interests and positions are put under consideration. For this particular budget in the Trump administration, it is difficult to get an agreement due to the following reasons;

The majority (Republicans) are in line with the promise of president Trump during the campaign has proposed allocation on building the wall in the Mexican border and provide funds for deportation. The Minority opposes as they stand for immigration, therefore, rejected the deportation funds and thinks that increasing border security is better than building a wall, (Chohan, 2017).

Again, the majority proposed the cut in domestic spending and increases in the military spending which the minority rejected as they believe in more funding for domestic spending. The Republicans wanted a cut in the plan parenthood projects while it was very clear from Democrats that expenditures in plan parenthood should be maintained.

Also, Mitch the majority leader believes that cutting spending on the social security was critical and the money should be directed to other core projects for the Republicans such as military spending, on the other hand, Chuck the minority leader believed that social security fund is important and should be maintained. With these examples, it shows why it is difficult for the two to agree due to party lines, government priorities and the need to deliver on the promises made by the president.

Irreconcilable interests of these players that keep them from agreement

The proposal on immigration and border security is one section that both the democrat and Republicans cant agree on, (Chohan, 2017).

The cut on domestic spending has also divided both houses along party line, (Chohan, 2017).

The social security funds are also a major source of agreement between Chuck and Mitch (Chohan, 2017).

Increased military spending is also not supported by the minority instead they propose increased domestic spending (Chohan, 2017).

Deportation spending is also sharply opposed by the Democrats.

The Mexican wall has been opposed by Democrats and a section of Republicans, therefore, making it difficult for Chuck and Mitch to agree, (Chohan, 2017).

Whether the budget and legislative process make it easier or harder for them to reconcile their differences

The answer to this question is yes and no. This is because the budget gives the two parties the opportunity to set their priorities and therefore, negotiate on which one can be addressed by the budget and which priorities will be struck out, (Binder, 2015). An example is the proposal to increase military spending and cut domestic spending where both the two parties agreed and came out winners at the end of the budget deal. This is because the military spending was increased, but domestic spending was not cut, (Binder, 2015).

On the other hand, the legislative process makes it hard for the two to reconcile their differences as each party has its point of view regarding issues of national importance, (Garrett, 2000). An example is the immigration policy where migrants from selected countries were banned from entering America, and their deportation security was removed, (Garrett, 2000).

Whether there is a potential resolution of this seemingly irreconcilable issue

Yes, there is a possible way of reconciling the two parties and ensuring that both are satisfied. This will be through a bipartisan approach to matters of national importance such as the budget (Smith, 2013). This was witnessed in the budgetary allocation proposal where a good number of Republicans and Democrats agreed that increasing border security was better than building the Mexican wall, (Smith, 2013).

Question two

Argument on whether Social Security does not add to the deficit

The budget deficit in most cases is not affected by the addition of the social security. This is because the social security has had excess and the money used by the government is a loan from the social security, (McKay, 2017). Additionally, social security has investments regarding real estate that is used as a source of income to cover its shortcomings. The key to understanding how social security does not contribute to the government debt is by looking at the flow of money in and out of the social security fund, (McKay, 2017). The money flow showed that the income was $805 Billion and the outflow $733 Billion, therefore, the surplus of $72 Billion, (Stiglitz, 2013). Moreover, if the social security fund cannot pay the beneficiaries the benefits, still it can lower the benefits to a level that they can handle, (Stiglitz, 2013).

On the other hand, President Obama once said that social security is not a primary contributor to the long-term debt. This statement means that it contributes to the deficit, but it is not the primary contributor to the debt, (Harper, 2014). The social security fund is a pay as you go system which means collected payments are immediately used to pay benefits to the retired persons. According to records as of December 2000, the social security had a debt of more than a trillion dollars owed to the USA government. Additionally, it is projected that the deficit will increase further by the year 2015, (Harper, 2014).

Whether either of the arguments are right or wrong, or more useful

The argument that states that social security contributes to budget deficits is right going by the figures that have been presented. However, this fund is supposed to be independent and should not borrow money from the federal government, (Harper, 2014). The study of how social security fund contributes to the budget deficit and how to fix it is essential. Restructuring the fund is one of the ways it can be saved to ensure that it runs on its own and not on debts, (Harper, 2014).

How Social Security can recover its purloined surpluses of the past years

The social security fund can recover its surplus of the past years by reducing the benefits given to the beneficiaries, increase member contributions and increasing investments, (Streeck, 2014).

Part two

Question two

Best case for each of these two alternative visions of an approach to fixing the budget

The balanced budget is a constitutional requirement that requires the states and federal governments to spend only on the income they generate (Xue, 2015). This requires a balance between the projected revenue and the expenditure of the government. This balanced budget has been added in constitutions of many states in the USA, and there has been an attempt to add the same to the Federal USA constitution, (Xue, 2015). A balanced budget is exempted during a war, a national emergency or during an economic recession, (Xue, 2015). Even though economists are divided on whether a balanced budget will reduce borrowing, a majority of economists disagree that it will not reduce borrowing spending, (Stone, 2016). This approach will be beneficial as it gives an alternative where the government is allowed to borrow for long-term expenditures such as transport and other infrastructure. Economist state that a balanced budget will slow achievement of long-term economic growth by the government, (Stone, 2016).

On the other hand, the budget process of the 1990s included deficit reduction by the USA government and gave the responsibility of budget control to the Federal Government. This process created two main budget control process that is a set cap on the annual appropriations for spending and pay as you go process for entitlements and taxes, (Schick, 2008). The major disadvantage of this budget process is that it is considered less powerful regarding checking on the appropriate discretionary spending, (Schick, 2008).


The preferred solution between the two proposed solutions

I would choose the balanced budget approach as this will ensure that recurrent expenditure is within the income of the government, (Stone, 2016). This ensures that the government does not borrow to finance recurrent expenditure such as paying taxes. Also, this process gives the government the ability to operate the budget beyond the government income if the expenditure is for long-term expenditure such as healthcare facilities, security, and transport among others. Even though economist sees this approach as one that will slow economic growth, in my opinion, this will reduce the public debt, therefore, achieve economic growth, (Stone, 2016).

The examples of the success or failure of the two approaches that is cited to buttress the case

The case of Canada in the 1990s when it was facing serious budget deficits, the country adopted the balanced budget approach that saw the budget cut by approximately 20%. This enabled the government of Canada to reduce the budget deficit to almost zero within three years, (Mou, 2017). The balanced budget also allowed the government of Canada to reduce public debt by an estimated 1/3 in five years. All this was achieved without raising taxes in Canada. Therefore, all this was made due to the balanced budget policy, (Mou, 2017). On the other hand, Sweden in the year 1994 was facing financial challenges, and they adopted a balanced budget, and this helped the country to recover from its economic ruins, (Mou, 2017).

The failure of a balanced budget is seen during Bill Clintons presidency in the 1990C's (James, 2015). This was beneficial as it reduced the public debt and increased surplus. However, this made the private sector to operate in a negative territory, (James, 2015). This led to the shutdown of many in the private sector as they cannot afford to work in a negative like a government, (James, 2015).


Part three

Question two

Why Member of Congress, the governor, and the mayor each be said to face the most serious budget problem

Governors say they face the most serious budget problems as they have to operate within the balanced budget provision. This mainly means that they are not allowed to spend outside the income of the state, (Oleszek, 2014). Many governors as they are faced with budget deficit are forced to cut on essential services to the critical government functions. Other governors have been forced to limit the number of hours' government offices are opened to save money to be used in other government services, (Farrier, 2015).

The congressmen on their part have a heavy responsibility in budget making, implementation, and oversight of the budget utilization, (Oleszek, 2014). Therefore, congressmen/women face the problem of balancing the services to prioritize as lobbying continues from governors, executive, and local governments. The Congress has the responsibility of ensuring that the public debt is also at an absolute limit, (Oleszek, 2014).

A Mayor is responsible for the preparation and implementation of the city budget. This budget, however, must be passed by the city council, (Farrier, 2015). Therefore, the primary problem the mayor will have in term of budget allocation is to ensure that the budget addresses the needs of the city residences and is supported by the members of the council, (Farrier, 2015). Sometimes the mayor will give the budget preparation function to the chief administrative officers, and the problem here will be getting the priorities right. Therefore, in conclusion, the main budget problem the mayor's face is balancing and getting the councils approval, (Farrier, 2015).

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