The US is beleaguered once again by four major deficits in fiscal, public investment, opportunity as well as employment debts. A budget proposal by presidential candidate Mitt Romney along with his running mate Paul Ryan boast a promising sign of decreasing the fiscal deficit but would adversely affect the remaining three.
Even with the 30 months of increased job growth in the private sector, the US is still plagued with a huge job shortage. The unemployment rate still falls slightly above the standard rate (even with the economy performing in near competence). Likewise, the labour force partaking is still below significant lows. The 11 million generated jobs are still needed to for the US to come back once again to its pre-recession employment status. In its current state it is forecasted to be at least 8 years away. As of the moment, the unrelenting high employment decreases the economy’s growth capability by depriving present workers of valuable proficiency and skills.
Presidential candidate Romney recognises that the huge expenditures along with the scheduled expiration of tax cuts could potentially throw the economy back again into depression next year. He promised to guide the ailing economy back from the edge by extending the cuts in taxes approved by the Bush administration.
It’s not a surprise that he slightly overstated his tax suggestion’s long term effect as having an exponential growth. Decreasing individual tax rates on savings and investment will best a reticent increase in jobs as well as income. In spite of the Bush-era tax cuts, the last expansion (2001-20017) was indeed the most terrible of the post-war period in terms of outlay assets, GDP growth, employment and wage rates.
Nevertheless if all of Romney’s added cuts in taxes were to be subsidised in a revenue-neutral manner like what he intend to do, the composition of taxes would be the only change and not the general tax share of GDP. Everything else would include government investments in all three main sectors on which economic growth and high-wage jobs largely depend such as research, education and infrastructure. The aforementioned areas only account for less than 8 %of the government expenditure and their shares have been progressively reduced in the past years. If such proposals will push through, these would constitute to new historic lows.
The highly controversial-notable budget plan by Romney would also make the federal tax-and-transfer system significantly less than progressive hence, could highly result in further worsening income inequality which is already at its peak level since the recession.
The rise in income inequality will stimulate a growing opportunity insufficiency for children born into middle-income as well as the marginalised families as reflected in the dissimilarities in educational background and degree and a further decrease in inter-generational aspects. If the proposal would materialise, the discrepancy in opportunity would further widen which will steal the nation of its potential skills, efficiency and productivity.
Romney revealed just the tip of the iceberg in terms of the more elaborate details of his deficit-reduction proposal. Based on what he already made public, the speculations have a high probability in increasing the employment deficit, investment deficit as well as the opportunity deficit which has a proportional negative effect for the future growth and prosperity aspects as well.