Two government reports issued in the last few days show that despite higher tax revenues, thanks to the tax increases signed into law by the president earlier this year, deficits are still sky-high and the national debt continues its inexorable climb into the stratosphere.
Although the deficit for the first 11 months of the 2013 fiscal year was down slightly compared to last year at this time, real progress toward a balanced budget remains elusive. Through August the federal government spent $3.2 trillion while tax revenues rose by $285 billion, to $2.5 trillion, leaving a deficit of $755 billion. According to the Treasury Department, this is the highest level of revenues the government has collected in any of the last 16 years, with one exception (2007). The increased revenues came from the law that increased the top income tax rate from 35 to 39.6 percent, the top tax rate on dividends and capital gains from 15 to 20 percent, and the phasing out of some personal exemptions and deductions for those earning $250,000 a year or more.
Despite the huge increase in revenues, however, the national debt continues to climb, according to the Congressional Budget Office (CBO). The debt is now 73 percent of the nation’s gross domestic output of goods and services — the highest in history (except for a brief period during World War II) and twice what it was just six years ago. The CBO estimates that unless “significant changes” are made to tax and spending policies, the national debt will soon exceed 100 percent and could go to 200 percent if the current sequester is repealed.
One of many failed attempts to rein in government spending was the effort by former Senator Alan Simpson and the former director of the Small Business Administration (SBA) in the Clinton administration Erskine Bowles, who headed up the National Commission on Fiscal Responsibility and Reform (NCFRR) back in 2010. That commission was created by executive order from the White House and wound up deadlocked in December 2010 when only 11 of its 18 members could agree on the strategy to close the deficit and reduce the national debt.
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