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Balancing Budget is Hot Congressional Issue

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The federal budget is out of balance:  for each dollar of revenues collected, $1.33 is spent . Congress and President Obama will soon meet to begin finalizing the approach to be taken in order to balance the budget over the long term.

A growing economy increases federal revenue; however, the current economy has not yet reached full employment status and, for the purpose of crafting a budget, future economic growth cannot be assumed, but can be considered. Spending formulas related to GDP increments are another possibility.

Various approaches have been suggested to correct this budget imbalance. One approach is to establish a flat tax to collect more revenue. Another approach is to adjust deductions such as those for charitable contributions, mortgage interest, medical expenses and a myriad of others. Another possibility is to allow deductions on Schedule A based upon an
income sliding scale. For example, taxpayers making $50,000 or below would get the full deduction, while those making $50,000 to $100,000 would receive a lower deductible, such as 75 percent, on up to a complete phasing out of deductions at the highest income levels.

The biggest drivers of the federal budget are defense spending and social
programs such as Medicaid. Defense spending increased dramatically due to
the Iraq and Afghanistan engagements, but these are now being phased out, which should result in significant reductions in the DoD budget over time.

In a peacetime economy under President Clinton, the budget was first balanced
and then came into a surplus over $230 billion. The surplus disappeared over the course of the Iraq and Afghan engagements. Prior to President Clinton,
President Nixon was the only other chief executive to balance the federal budget while still preserving some semblance of a social services infrastructure.

There has been some discussion of migrating responsibility for the Medicaid program and its funding back to the states. The thinking is that the states know how to spend the money more efficiently than the federal government. In addition, the states have the requisite databases necessary to reduce or eliminate data processing duplication and paperwork.

Another idea under consideration is federal taxation of junk food under the theory that it contributes to growing Medicaid deficits, as well as those of other programs. Taxing junk food such as sugary sodas and triple burgers would also generate more revenue for the government to deal with the shortfalls in Medicaid.

Sugary sodas elevate glucose and A1C blood levels, leading to juvenile and Type II diabetes. Triple burgers may increase cholesterol levels, as well as burden the body with processing too much protein in a short period of time. In any event, the junk food shows up eventually in patients’ blood and urine chemistry. Taxing junk food could lead to reducing the incidence of both adult onset and childhood diabetes, both of which drive up costs for government medical programs and private insurers. Junk food is also bad for the elderly and other at risk populations. Junk food aggravates the conditions of people with multiple morbidities associated with a multiplicity of diseases which are costly to diagnose, treat and manage.

Recently, the state of Washington legalized marijuana. Other states are considering its legalization, along with allowing the medical use of marijunana for patients with chronic unrelieved pain and those with terminal diseases. Federal legalization of marijuana could create a huge bonanza if the substance were subject to federal tax. This idea could be a significant revenue generator, and could be regulated in the same way alcohol is regulated. Decriminalization would also reduce court loads by eliminating minor drug offense arrests.

At some point, congress must agree upon a program to phase in both revenues and spending cuts and/or decreases in the growth of federal programs in keeping with GDP increments. The stakes are high, and the overall expectations of domestic and overseas investor depend on a continued economic recovery.

These are just a few of the many remedies available to bring the federal budget into balance, both in the short and long term.

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About Dr Joseph S Maresca

I've taught approx. 34 sections of collegiate courses including computer applications, college algebra, collegiate statistics, law, accounting, finance and economics. The experience includes service as a Board Director on the CPA Journal and Editor of the CPA Candidates Inc. Newsletter. In college, I worked as a statistics lab assistant. Manhattan College awarded a BS in an allied area of operations research. The program included courses in calculus, ordinary differential equations, probability, statistical inference, linear algebra , the more advanced operations research, price analysis and econometrics. Membership in the Delta Mu Delta National Honor Society was granted together with the degree. My experience includes both private account and industry. In addition, I've worked extensively in the Examinations Division of the AICPA from time to time. Recently, I passed the Engineering in Training Exam which consisted of 9 hours of examination in chemistry, physics, calculus, differential equations, linear algebra, probability/ statistics, fluids, electronics, materials science/structure of matter, mechanics, statics, thermodynamics, computer science, dynamics and a host of minor subject areas like engineering economics. A very small percentage of engineers actually take and pass the EIT exam. The number has hovered at circa 5%. Several decades ago, I passed the CPA examination and obtained another license in Computer Information Systems Auditing. A CISA must have knowledge in the areas of data center review, systems applications, the operating system of the computer, disaster recovery, contingency planning, developmental systems, the standards which govern facility reviews and a host of other areas. An MBA in Accounting with an Advanced Professional Certificate in Computer Applications/ Information Systems , an Advanced Professional Certificate in Finance and an Advanced Professional Certificate in Organizational Design were earned at New York University-Graduate School of Business (Stern ). In December of 2005, an earned PhD in Accounting was granted by the Ross College. The program entrance requires a previous Masters Degree for admittance together with a host of other criteria. The REGISTRAR of Ross College contact is: Tel . US 202-318-4454 FAX [records for Dr. Joseph S. Maresca Box 646 Bronxville NY 10708-3602] The clinical experience included the teaching of approximately 34 sections of college accounting, economics, statistics, college algebra, law, thesis project coursework and the professional grading of approx. 50,000 CPA examination essays with the American Institute of Certified Public Accountants. Additionally, membership is held in the Sigma Beta Delta International Honor Society chartered in 1994. Significant writings include over 10 copyrights in the name of the author (Joseph S. Maresca) and a patent in the earthquake sciences.