An Overview on Federal Budget Situation of the Year 2001
The summary provides an overview on federal budget situation of the year 2001, with emphasize on federal debt over the previous years, and with reference to historical data, budget structure, its management, economic uses and future evolution. The report deals with a temporary positive turn of situation over the time period 1998-2001 regarding the state of federal budget. Previously, U. S. economy had confronted with a severe recession. Government had run a budget deficit of $168. 1 billion in the fiscal year 1988, $152. 1 billion in the fiscal year 1989, $220. 4 billion in 1990 and a $288 billion deficit in fiscal year 1991.
The economic decline reached its lower limit in the fiscal year 1992, when US Government ran an alarming $293. 2 billion deficit. However, the next years brought about the long awaited change. Thus, the economic situation set out to recovery as lower deficits started to be achieved: $254. 9 billion in 1993, $233 billion in the fiscal year 1994, $164 billion in 1995, $107 billion in 1996 and $22 billion in the fiscal year 1997.
After more than 30 years of repeated deficits (the last budget surplus had occurred in fiscal year 1969), the situation finally seemed to turn for the better as the U. S. Government ran a budget surplus of $69 billion in fiscal year 1998, $125 billion in 1999, and $236 billion in fiscal year 2000. For the fiscal year 2001 the Congressional Budget Office (CBO) estimated a $281 budget surplus whereas estimations up to $5. 6 trillion have been made regarding the cumulative budget surpluses over the next 10 years. Nevertheless, in spite of all optimistic anticipations, budget surpluses kept authorities waiting, as they stubbornly refused to measure up to CBO’s expectations.
Not only that, but economy plummeted once more into depression, only months after it was believed to be on the right track to full recovery. Nonetheless, the worst did not happen and, even though budget surpluses are yet to be achieved, at present economy fights its way out of depression. For all that, analysts remain skeptical about this so called recovery. Several arguments have been brought to support this idea: firstly, it is considered that since the economy increase is not based on job growth or significant investment in productive capacity, it is not viable and long -lasting.
Secondly, analysts argue that economic growth is due to unsatisfactory job creation. Thus, new jobs are largely non-union, and paid considerably less than those that have been down-sized. In addition, job creating averages 188,000 per month since November 2004 and taking into consideration that the economy needs around 150,000 jobs just to keep pace with new workers entering work force market, this is a sign of stagnation. Thirdly, living and working conditions have become worse for millions of Americans which is an indicator of a phony economic growth.
Finally, Bush’s administration has more cuts in view, which will lead to further degradation of quality life. Tax cuts and increased military spending have deepened even more the hole in the budget deficit. Thus, the U. S. Government ran a record $113. 94 billion deficit in February 2005, surpassing the $96. 70 billion deficit in February 2004. The total deficit for the fiscal year 2005 is estimated at $427 billion. Statistically, this means that the U. S. must borrow $1. 2 billion daily to clear off the debt.
Moreover, the total national debt is as high as $7. 7 trillion and this means well over $26,000 per U. S. citizen. Because this is money that has to be paid back with an interest, analysts argue that within the next ten years the U. S. Government will no longer be able to borrow enough money as to keep up with expenses. In addition, the trade deficit has increased by $500 billion since 1993. In 2004 the trade gap set a new record of $617. 1 billion, whereas predictions for fiscal year 2005 are even gloomier.
Moreover, inflation and interest rates indicators are all pointing to an unstable economic situation in which the tiniest shock can tip the balance for the worst. Thus, perspectives on U. S. economy are bleak and demand for immediate responsible action. Looking back to 2001 predictions, we may conclude that analysts of the time have considerably fed on air. Had it not been for their lack of realism, perhaps the current crisis would have been avoided. Nevertheless, economic predictions are extremely difficult to make with any precision as they often involve contradictory data.