Money Struggle – Government Budget Negotiations
It is a tradition every year for the Democrats and Republicans to fight over the government budget, sometimes resulting in a government shutdown like we might see at the end of the month. Usually, Democrats favor higher taxes, especially on the wealthy, along with a high amount of government spending, while Republicans favor tax cuts and reduced government spending.
Recently, the lines between those ideologies have started to become a bit blurry as the government is debating whether to extend former President Trump’s famous tax cuts in 2017 in what an interesting campaign issue will be. President Biden has already promised not to raise taxes on everyone making more than $400,000 and planned to extend most of Trump’s 2017 proposal, putting the Democrats in a precarious position if they are seeking tax hikes, something they weren’t even able to achieve in the two years they had total control.
It seems as if tax cuts are something that the Democrats are abiding by, and it is leading to similar fiscal policy ideologies from both sides of the chamber. Republicans haven’t been able to achieve the spending cuts they desired, leaving programs like Medicare off limits. Paired with the Democrats’ issues, the US has been receiving low tax revenues while increasing spending, blowing up the deficit to an estimated $1.5 billion. With inaction on both ends, events like Fitch downgrading the US credit rating will become more common as investors are concerned about the US’s inability to respond to a debt crisis.
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I am not a financial advisor and my comments should never be taken as financial advice. Investments come with risk, so always do your research and analysis beforehand.