The Federal deficit decrease compared to last fiscal year from by $1.3 trillion to $1.1 trillion according with Obama administration. Even do it is the smallest deficit since 2008, and the gap between the government income and government spending also decrease from 8.7 percent to 7 percent of economic output it still very high.
It was a result of higher taxes receipts and lower government spending. Government receipts increase 6.4 percent year over year as the economy grew and certain tax breaks expired. The corporate income taxes were the bigger contribution to raise the receipts. The decrease in expenses was majority due the falling military spending on Afghanistan and Iraq and unemployment insurance.
In other words, the government even improves in decrease the deficit; it is still very high and will try to reduce it, increasing taxes and decreasing in spending next year. When the Bush era rate reductions expire on December 31, the total effect for the tax revenue will be $400 billion. Those exemption taxes will disappear include for individuals and business. The government will decrease in spending due to the emergency unemployment –compensation program is expiring, it will save $26k billion. In addition, Medicare payments will decrease 27 percent or $11 billion related to the payment to the doctors, because this year the Congress has not passed the usual so called “doc-fix”. But, the biggest cut is expected to be by $65 billion will be for more federal programs.
The federal deficit is creating a lot of economic issues. The government will try to decrease it, increasing taxes and decreasing in federal spending. An increase in taxes will create a decrease the disposable income; it will reduce consumption and savings. Therefore, the demand for goods and services will decrease and the companies will need a fewer employees and the employment rate will increase. In addition, a decreasing in government spending will create a similar effect and...