RECORD DEFICIT: We're only halfway through the fiscal year, and already the U.S. government's budget deficit has reached $311 billion. With six more months to go, the deficit will easily surpass the $410 billion the Bush administration expected. Economic analysts worry that large deficits lead to large debts, which weaken the economy.

The U.S. budget year starts on October 1 and runs through the end of September. At the midway point, March 31, the government's debt had reached $311 billion. What's causing this debt? Large government expenditures. And current tax revenues do not cover what the government has spent so far this fiscal year.

Taxpayers Pay the Price

The deficit impacts American taxpayers. When the government spends more than it takes in through the collection of taxes, the government must

• borrow money from other countries, and/or
• issue Treasury bonds.

Borrowing pushes the government into debt-it must pay back money borrowed plus interest. In fact, in the 2008 budget, $261 billion goes toward interest on earlier debts.

The government can also pay down the debt by

• increasing taxes,
• reducing government spending, or
• a combination of both.
  
  

Baby Boomers and More Spending Coming in 2008

We can expect more large government spending later this year. Congress plans to approve an additional $170 billion for the Iraq and Afghanistan wars in the next few weeks. The government also plans to help people struggling because of the recession. For example:

• Congress will most likely pass legislation to assist millions of Americans currently facing foreclosure on their homes.
• President Bush's economic stimulus package calls for small rebate checks to be sent to most U.S. taxpayers beginning Monday.

We can also expect large influxes of baby boomers into the Social Security system over the next several years, beginning this year with the first wave of retirees.

In a slowing economy, the government collects less tax revenue. That means it has less money to spend to pay for programs such as Social Security, or to pay off earlier debt.

Sources

"U.S. Deficit at Record High and Rising" (Christian Science Monitor)

"2008 U.S. Budget Deficit Bleeding Red Ink" (CBS News)

"United States Federal Budget, 2008" (Wikipedia)

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Question for our readers:

Do you think there will be any Social Security left when you retire?