The Treasury Department gave the president some unwelcome news just as he was preparing to meet with congressional leaders to address our looming fiscal cliff. Although October’s tax receipts rose from $163 billion to $184 billion, they were outpaced by expenditures. The month’s expenses rose also — to $304 billion from around $262 billion, resulting in a $120 billion deficit for the month.
Contrary to the president’s 2008 campaign promise to cut the deficit in half, it’s been creeping ever upward. This may explain why he didn’t repeat his promise this go-round.
In addition, that promise didn’t begin to address the real problem. Halving the deficit shouldn’t be the goal. Any deficit increases the debt. The real goal should be converting the deficit into a surplus and begin paying off the debt as a show of good faith to our creditors.
Last month’s deficit of $120 billion represents an 18 percent rise from that of Oct., 2011, which was $98 billion and is $6 billion greater than it was previously estimated.
According to Reuters:
Following President Barack Obama’s election to a second term last week, the debate in Washington has quickly shifted to the combination of expiring tax breaks and new spending reductions known as the “fiscal cliff.”
Lawmakers involved in the debate gathered in Washington on Tuesday for the first time since the elections, setting the stage for a week of trial balloons and rhetorical repositioning.
The Congress has just returned from a break after the November 6 elections. Topping the agenda is the year-end convergence of urgent tax and spending issues that, if mishandled, could plunge the economy into another recession.
Economists agree that there are two methods the government has at its disposal to increase tax revenue. It can increase tax rates or spur economic growth. The method it chooses depends upon the nation’s current economic outlook.
In a vibrant economy, the former remedy — increase tax rates — makes sense, and it has the added benefit of rounding out the upward economic spikes.
However, if the government decreases tax rates in a lackluster economy, the savings stimulates consumer spending and investment, this increasing tax revenue.
With growth hovering at two percent, it’s tough to argue we’re in a vibrant economy.
Read further at Reuters.