De La Torre 1 Alejandra De La Torre John Kubler English 114A 19 November 2013 National Debt Crisis: What Really Happened?

We have a looming national debt that looks like a tsunami coming toward us. Our governments economy is going through the worst economic crisis since the Great Depression. The national debt exceeds $10 trillion. Although people blame President Obama, this is not a recent problem. According to the article Economic Downturn and Bush Policies Continue to Drive Large Projected Deficits written by Kathy A. Ruffing and James R. Horney, President Obama actually inherited this problem from the Bush Administration. The problem is that the government is spending more than what we actually have causing serious deficit problems in our economy (Ruffing and Horney 1). Unfortunately, just like the Bush administration before it, Obama and his team are going to borrow big. The most significant causes that began the National Debt Crisis started with making bad decisions during the Bush Administration, yet it is increasing during the Obama administration. However, some of the solutions are having faith in capitalism, raising taxes on the rich and cutting unnecessary social services like Welfare. It was during the Bush administration that our countrys debt has increased to surprising amounts (Ruffing and Horney 1). The center piece of Bushs economic agenda was cutting taxes. In the years before, during former President Ronald Reagan administration, he was the first to have major tax cuts, but then realized the deficit was becoming too large. After he saw the deficit increasing, he was forced to sign the largest tax increase since the Depression. Lori Montgomerywho focuses on efforts to tame the national debt-is a reporter who covers U.S. economic policy and the federal budget focusing on efforts to tame the national debt. Montgomery mentions in her

De La Torre 2 article, Running in the Red: How the U.S., on the Road to Surplus, Detoured to Massive Debt that President Clinton made an agreement with Congress that turned large deficits into large surpluses. The year 2001 was the 4th consecutive year of surplus Clinton made. However, in the documentary 10 Trillion and Counting, which focuses on the causes that actually began the National Debt Crisis, Bush believed the surplus was not the governments money, but the peoples money. He then returned the surplus, he had inherited, to the American people in a form of a tax cut. George Bush was the first in 30 years to assume office with budget surplus, yet he left office with a trillion dollar deficit. After just three months in office, Bush signed a tax bill that was projected for ten years to cut taxes by $1.3 trillion. Bushs philosophy was if you cut taxes then it puts pressure on the system to cut spending (10 Trillion and Counting). He believed cutting taxes helped smaller business owners keep their money to prosper. Bush obviously didnt learn his lesson when his father was president and promised absolutely no more raising taxes, however the taxes needed to be raised in order for the budget deficit. On the other hand, eight months after Bushs inauguration, September 11 occurred. September 11 threatened the economic fortunes of the country. After the terrorist attack, there were two wars, one in Afghanistan and the other in Iraq. The Iraq and Afghanistan wars have added $1.3 trillion in new borrowing (Montgomery 1). President Bush had made many mistakes during his term. He ordered for two wars, yet had no money to pay for them. He ordered two enormous tax cuts, which just resulted in high deficit each year (Ruffing and Horney 2). He had the National Debt rising because he never vetoed a spending bill. He actually passed the Medicare Part D Bill, which many never had the money to pay for. Medicare Part D is a prescription drug benefit for seniors. A new prescription drug benefit for Medicare recipients contributed another

De La Torre 3 $272 billion. Over time this is going to cost about $8 trillion and it will keep increasing (10 Trillion and Counting). On January 20, 2009 many gathered at Washington D.C. to watch President Barack Obama get inaugurated. Many watched in hope that this man would save the economy and change the state their government is in, since during his campaign he promoted change (10 Trillion and Counting). However, President Obama inherited more than $10 trillion in debt, a frozen financial system and the unemployment rate ready to hit double digits. People had lost confidence in Washington and he had to win their trust back. There was lots of debt from our government borrowing so much money from foreigners. They lend the U.S. money because there was not enough for us to pay for all the services. The government used credit to pay for credit, and spent more than what we actually had causing serious deficit problems in our economy. The United States is "1 trillion dollars" in debt because of student loans (Holmes 1). The issue about student loan debt is a crooked system. Sallie Mae, one of the biggest student loan giver, was "selling out students for bribes" (Leonard 1). In other words, students were being pressured into taking out "private sector loans" to help pay for their college education in order to have a better future (1). These loans have "higher interest rates than government-backed loans" (1). Students are put into tough situations in order to have a good education and become unable to pay off these loans causing our national debt to increase. Home loans as well as student loans have taken a role in the national debt crisis. The subprime mortgage crisis began with predatory lending. The term predatory lending is a phrase to describe illegal activities in the mortgage industry (Ruzich and Grant 4). The fact that the one who does not benefit from the mortgage transaction is the homeowner makes it a predatory lending practice which should be reported. Subprime mortgages are home loans made at higher rates of interest to borrowers who represent higher credit risks and have lower credit scores (1).

De La Torre 4 In 2008 a survey of economists had identified the effects of the mortgage crisis as the number one threat to the U.S. economy. Predatory lending gives homeowners a sense of fraud that they will be able to pay and own that house, but in reality they wouldnt be able to keep up with the payments. This shaped the mortgage crisis. There are actual people in this country that have to pay more taxes than the one percent. This is not a fair act because the one percent makes three or four times more than an average American. The rich do not become affected by the decline in our economy as those that are less fortunate. Raising the rich people's taxes will help to improve our economy. Higher taxes on them will not affect the rich like it will affect the poor or middle class. While a lot of rich people will argue they earned and worked hard for their money, we must realize that they were also more fortunate. Most of them had resources for a good education, or just born with the best genes. Maybe they were not the ones "working" for the money and just inherited a fortune. In the article "Why Raising Taxes on the Rich Is Good Economics" it is mentioned that "Now, more than ever, the highest-income households are in a better position to pay taxes" (Sherter 1). Taxes should only be raised on the wealthy because if not the ones that would become severely affected are the poor. By not taxing the highest-income households, deficit reduction relies too heavily on spending cuts that harm low and middle income Americans (Sherter 1). The taxes everyone pays goes to the government, like for schools, roads and police departments. These things were built by everyone rich and poor. Yet the rich have us believing that because they worked hard for their success than they don't owe anyone anything because they did it all by themselves. On the other hand, welfare offers "citizens a cradle-to-grave system of unconditional government support" (Rogan 1). This includes things like food stamps and unemployment aid. This gives people a reason to not look for a job and not better themselves. People in welfare are

De La Torre 5 being helped too much. Most are perfectly healthy people that can find a better job or even get two jobs. Welfare is being taken advantage of by the citizens who use it. This would save the country plenty of money if it were cut. There are many families that are struggling yet don't take advantage of welfare. People should do whatever they can to make it through without any help. In order to solve our debt crisis, we need to stop borrowing money from foreign countries, which is only increasing the debt with them, as well as end the welfare program that is cradling people instead of pushing them to a better life. Taking out loans also plays a factor in our national debt crisis. The borrowers had the choice to take out the loan or not and they decided to try and get cheap easy money, which ended up being a bad idea. If people just started to take care of themselves and be independent, the government wouldnt have to worry about loaning the people money and they could start paying off their debt instead of paying for the peoples loans who cant pay.

De La Torre 6 Works Cited 10 Trillion and Counting. PBS.org. Frontline, WBGH Education Foundation, 24 Mar. 2009. Web. 18 November 2013. Holmes, Brian. Silence=Debt: Life Beyond the Education Bubble. BrianHolmes.wordpress.com. n.d. Web. 18 November 2013. Leonard, Andrew. Selling Out Students. Salon.com. Salon Media Group Inc., 8 Jun. 2012. Web. 18 November 2013. Montgomery, Lori. Running in the Red: How the U.S., on the Road to Surplus, Detoured to Massive Debt. WashingtonPost.com. The Washington Post, 30 Apr. 2011. Web. 18 November 2013. Rogan, Tom. Welfare States are Unfair States. TheWeek.com. The Week Publications Inc., 7 Jan. 2013. Web. 18 November 2013. Ruffing, Kathy A., and James R. Horney. Economic Downturn and Bush Policies Continue to Drive Large Projected Deficits. Cbpp.org Center on Budget and Policy Priorites, 10 May 2011. Web. 18 November 2013. Ruzich, Constance M., and A. J. Grant. Predatory Lending and the Devouring of the American Dream. in They Say I Say: The Moves that Matter in Academic Writing. Gerald Graff, Cathy Birkenstein, and Russell Durst. 2nd ed. New York: Norton, 2012. 624-45. Print. Sherter, Alain. Why Raising Taxes on the Rich is Good Economics. CBSNews.com. CBS Interactive Inc., 9 Aug. 2011. Web. 18 November 2013.

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