federal budget

At what point does public debt become a problem? If you ask many Republicans when the debt hits 90% of GDP we’re in trouble. Given that the Federal Debt is above this level you can see why there is a push for budget control if not outright austerity. But where did that magic figure come from?

It’s April in Minnesota, which means many of us are caught up in the budget discussions brewing at the state Capitol. However, at the federal level, policymakers’ inability to reach a deficit-reduction deal has triggered a series of across-the-board federal spending reductions. These automatic cuts, known as sequestration, started to take effect on March 1.

Among all the points in the budget that President Obama is releasing this week, none is getting as much attention as his cuts to Social Security and Medicare. His proposal, which is part of a larger plan to ditch his favored policies for those that could stand a chance of passing a hostile House, will slow down the growth of entitlement programs by lowering the cost-of-living adjustments in the future. In 2011, these two programs cost $1.2 trillion, and the cost will increase in the years to come.