Irreversible Debt

If President Obama's 2011 budget were put into effect as proposed, the U.S. federal government would add an estimated $9.8 trillion to the country's accrued debt over the next decade, according to a preliminary analysis from the Congressional Budget Office.




Of that amount, an estimated $5.6 trillion will be in interest alone.

By 2020, the agency estimates debt held by the public would reach $20.3 trillion, or 90% of GDP. That's up from 53% of GDP in 2009.


So why did the debt incurred by the government almost double?


1. The president's proposal to extend the 2001 and 2003 tax cuts for the majority of Americans.

A huge percentage of the government's income comes from tax alone. Recall how you had to pay Government Service Tax on every single products you pay for? Multiply that amount by the total number of products in the United States.


You will definitely get an astronical amount.


Right now, they are scraping that astronomical amount in an attemp to stimulate growth and development under such dire situations.


This is probably commonly regarded as the long term strategic view.


If they were to raise the tax level once again, interest rates will surge and the number of investments will definitely drop. A vicious cycle will set in. In turn, many investors will be put into an impasse and many will give up for the conditions are extremely acerbic and the chances of succeeding is very slim.


2. The proposal to protect middle- and upper-middle-income families from having to pay the Alternative Minimum Tax (AMT).

Usually, the richer people will have to pay more tax because they have to support the burden of the economy(namely the poorer people). They too have to pay for the subsidies available to the poor ones in the society.


On top of that, they have to finance the various developments of the country per se.


For now, we can only wait and see if the strategic move will actually reap great results in the future. If it doesn't, there will be great repercussions on the entire world.


But, I trust that this plan will work. Who gives a damn about all these debts when they can be resolved sooner or later?


It's just a matter of time.
 
 
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