The federal deficit and the economy are the two most important issues that candidates for President of the United States should address in their upcoming campaigns for the election of 2012. President Barack Obama has called for spending cuts and additional taxes for the wealthy in stating that the wealthy should pay their fair share. Republican presidential nominee Mitt Romney favors reducing the growth of entitlement programs and not increasing taxes. The federal deficit exceeds 1 trillion dollars, and without some action taken, the deficit could grow to over 3 trillion dollars by 2030 (Ron Haskins, 2012).
It’s being argued that the most important issue addressed should be creating jobs instead of deficit reduction. The Republicans may be on the wrong track entirely with their position that taxes and spending need to be reduced while the nation is still experiencing high unemployment and a very slow economic growth rate. According to Isabel Sawhill (2012) more short-term federal stimulus and some long-term spending restraints should be the solution to the problem.
William Gale, of the Brookings Institution agrees that the major problems that must be addressed are a sluggish economy and federal spending. According to Gale, these problems cannot be addressed without revenue increases, which is just another term for higher taxes. Gale suggests that the tax system should be reformed by reducing credits, deductions, and loopholes while increasing the tax burden on high-income households. A value added tax could raise revenue by taxing consumption and a carbon tax on energy might work to help reduce our dependence on foreign oil (Gale 2012).
Given the different viewpoints on what needs to be done, it appears that we have agreement among Republican and Democrat supporters that we have a crisis on our hands. Federal spending is out of control. We have a slow economy (some call it a slowly recovering economy); we have high unemployment; and we have a federal government spending a lot more money than collecting. If Congress is given the go ahead to raise taxes and perhaps find some new types of taxes such as a value added tax, can we expect a reduction in spending or reduction in the growth of spending for hot-button issues such as Medicare and Social Security? Will Congress do the opposite by increasing spending once they have increased taxes? These are very important issues to consider in the upcoming election as they have the potential of swaying the critical undecided voter in either direction.
By Dr. William Whitley
Program Director, Accounting and Finance at American Public University