Question

What issues in the U.S. have led to a budget crisis?

Answer 1

The Budget crisis in the US is a result of 3 main factors :

1. Military funding to end terrorism – This is more than the budget spending on the next 10 govt expenses.

2. Tax cut – Especially with a tax cut in corporate taxes, 50% revenue was lost.

3. Unfunded mandatory spending – Spending via social security has led to a cost equivalent to $1 tn. Medicare, unemployment benefits, etc widen the gap between earnings and expenditure leading to budget crisis.

Apart from these factors, a major factor is the trump government’s latest Trade war with China which has led to major expenditure on US front. This has also lead to a rise in the global inflation level. thus raising the oil prices and prices of essential commodities. All this has expanded US expenditure tremendously without creating corresponding levels of income/revenue.