“In the middle of a recession, where we're just climbing out of it, where the economy -unemployment is still at 9.7 percent, the idea of raising

taxes and reducing spending is a prescription for disaster.”

-- Joe Biden

Explaining the Current Economic Situation in

America

The U.S. economy has suffered for the simple reason that its seeks to obtain the unobtainable and “have it all.” America spends trillions more than any other country in military expenditures, and yet it consists of only about 4 % of the national spending. This requires the U.S. to spend a lot of money it does not have, requiring it to borrow from foreign nations. Each time the United States borrows money from another country they are placed in further debt and since 2000 U.S. debt has rapidly increased, leading the recession of 2008.

Current State of the American Economy

The national debt is at about$14 trillion and rising

The wars in Iraq and Afghanistan have taken their toll on the economy

Medicare and Social Security have been questioned as they service all people 65 or older regardless of wealth. Rather than those who really need Social Security benefits and Medicare. This would help save the government from spending only on reasonable programs.

Causes of the current economic situation

Discretionary (spending by choice) and Non–discretionary (required spending) spending

Problems that contribute to the economic situation.

Discretionary

• Government spending that is decided through annual bills by the legislative and executive branch.

• Examples include: spending on space exploration, housing/education, defense spending, foreign aid, road construction, and funding for the FBI and NASA.

Non- Discretionary

• Government spending that is required by law, congress would have to change a law to adjust non-discretionary spending.

• Examples include Social Security, Medicare, and Medicaid. Which is mandatory.

Spending

http://cbo.gov/doc.cfm?index=12085Herfdfd

Republicans believe that limits should be placed on discretionary spending in order to reduce government spending. In fact discretionary spending has increased by 80% over the past 2 years according to Fox News.

Despite the increase in discretionary spending only about 39% of the total spending is sent towards discretionary spending.

The Debate

Our economy is slowly changing.Our spending on social programs, such as

Medicare, Medicaid, Social Security, is poised to greatly increase from 7.5 % in 2000 to 17.1 % in 2035 of our GDP.

While on the other hand our defense spending is poised to slightly decrease from 5 % in 2010 to 4.2 % in 2020 of our GDP.

Our Transforming Economy

Source: Congressional Budget Office via Robert Samuelson

Chart Projecting Future Spending  2000 2010 2020 2035

Social Security 4.1% 4.8% 5.2% 6.2%Medicare 2.2% 3.6% 4.3% 7.0%Medicaid+ 1.2% 1.9% 2.9% 3.9%Other Mandatory 3.0% 4.2% 4.0% 4.0%(Offsetting Receipts) -0.8% -1.3% -1.3% -1.3%Defense* 3.2% 5.0% 4.2% 4.2%Non-defense Discretionary 3.0% 4.2% 4.0% 4.0%Net Interest 2.3% 1.4% 2.0% 2.9%         TOTAL 18.2% 23.8% 25.3% 30.9%

The U.S. continues to increase Federal spending borrowing money to provide funds for growing government spending. The problem is not that the U.S. continues to increase federal spending, the problem is that the economy has greatly slowed down to grow. Growing government spending would be justified if the U.S. economy continued grow simultaneously with spending.

In a perfect world money obtained through tax revenues would increase naturally due to natural growth of the GDP, rather than increasing tax rates. With tax cuts from the bush administration near expiration date. And signs that it will not be renewed. (http://news.yahoo.com/s/ap/20110412/ap_on_re_us/us_spending_showdown_taxes)

Describing our Economic Struggles

As the annual growth rate for GDP falters and our country continues to spend luxuriously we are forced further in debt.

But why is the economy ceasing to grow?Economic Growth is linked to a variety of factors, some of

which are simply natural. While other factors such as a decreasing labor force and

productivity (according to Mr. Samuelson). Mr. Samuelson explained that the decreasing work force

occurs as workers from the Baby Boom begin to age and enter retirement depleting our labor force.

Fluctuating productivity have been greatly detrimental to the Annual Growth Rate of the GDP, productivity is the efficiency of laborers based on time oriented production.

Causes for the Economic Stagnation?

From Congressional Budget Office Via Robert Samuelson

Supporting Charts

  1991-2001 2002-10 2011-2021

Annual Growth Rate, GDP 3.1% 2.4% 2.3%

Labor Force Growth 1.2% .9% 0.7%

Productivity Growth 1.9% 1.5% 1.6%

From Social Security Administration via Robert Samuelson

Supporting Charts

 

Total Population (millions)

65+ (millions) % 65+

1950 160.1 12.8 8.0%1990 260.5 32 12.3%2010 316.3 40.7 12.9%2020* 344.8 54.9 15.9%2030* 371 71.6 19.3%

When America borrows money from other nations, they are responsible for not only paying back the other country in full, but also with interest (Debt Service).

About 6% of our total spending in 2010 was towards interest, which is billions just in 2010 spent on interest.

Servicing our Debt

A majority of our debt comes form individuals and institutions, social security, oil exporters, China, U.K., Brazil.

Who do we Owe?

In order for us to get back track we must cut back on spending. We must elect a leader who works to satisfy “the people” rather than their constituents. We need a leader who commits to finding a solution rather than committing to their political ideology. We need a pragmatist to address the problem using means that may not appeal to their party.

Conclusion

The End

Yared, Osborne, Paolo, Silas, and Jeffrey