" Foreign aid is seldom charity; it is an investment"

http://www.guardian.co.uk/commentisfree/cifamerica/2011/oct/14/aid-us-politics
Excellent points are made in this article discussing the proposal to increase foreign aid spending by 10%. Foreign aid is an easy cut for politicians to support without losing many supporters, as those directly seeing the effects of aid are not voting. This article points out that aid is rarely charity and is often of strategic importance, especially now that China is increasing foreign aid and presence in international development efforts. As resources become more scarce and economic globalisation continues, America would be wise to continue positive foreign relations efforts such as aid spending. Aside from all charitable connotations that follow foreign aid, aid dollars also are used to help secure areas, build and maintain roads, build infrastructure. All of these things contribute to the efficient movement of goods and increase access to potential new resource sites. Furthermore, political advantages of maintaining positive foreign relations allow for better working relationships for the military, and can contribute to global safety. Too often even the most educated Americans will agree to cutting foreign aid, not realizing that it accounts for less than 2% of the budget and is one of the most efficiently spent portions of the budget (in the sense that funds spent in countries in need of aid can often purchase a lot more and reach many more individuals than if the same money were to be spent domestically).

Cain's Proposed 9-9-9 Tax Policy

http://www.csmonitor.com/USA/Elections/President/2011/0930/Herman-Cain-s-999-plan-long-overdue-tax-reform-or-job-killer/(page)/3

Republican presidential candidate hopeful Herman Cain proposes an example of regressive tax policy that is likely to shift the burden of paying taxes disproportionately to lower income individuals. Those with lower incomes are likely to have less cash assets that are be tax exempt under this plan, another benefit for the wealthy that are likely to save a greater percentage of their wages and therefore avoid taxes on that portion of their assets. This model seems to proposed for the sake of simplicity, to appear transparent to the public. However there does not seem to be much credibility or sound economic support to its ability to address the budget issues America is facing. Hopefully this candidate's proposal will be dismissed by the public for being a regressive and counter productive tax policy.

Problem Set 1 - Question 1

On the state level, education spending varies from under 1% to over 5% of GDP. My initial reaction was that states with a lower percentage must be investing less money in education than states with higher percentages. However, this does not seem accurate, it seems that the states with diverse economies are spending a smaller percent of GDP on education. Hawaii is spending a large percent of the states GDP on education, this is likely because Hawaii has a much less diverse economy, making education a more significant spending category.
Education as a % of GDP in 2010:
New York : 0.94%
Hawaii: 5.27%
DC: 0.84 %

Federal spending on education in 2010 was 1.08% of the GDP, for 2011 education spending will be slightly less significant, accounting for approximately 0.92% of America's GDP. Education spending is projected to decrease in percentage of the Nation's total GDP over the next few years. It is estimated that in 2015 education will account for 0.76% of GDP. This decrease in the significance of education spending at the federal level is interesting, the drop to 0.76% seems quite significant. This number is an estimate that could depend on increased levels and diversity of federal spending, not necessarily a reduction in funding of education programs. Local spending on education varies by state, local spending is generally higher than the state and federal percentages. Most states' local spending on education varies between 3-4%. Hawaii is an exception, spending 0% of GDP on local education, the state's entire education spending must come at the state level instead of any local spending. New York spends 4.48% of GDP on education at the local level, this is much more significant than the 0.94% state level spending. This indicates that states like New York have very localized authority of education budget expenditures. This makes sense due to the different needs of the New York City school system as opposed to more rural communities in the state of New York. Spending on education in New York state is localized below the state level. There is a general trend of states that have lower percentages of the GDP spent on education at the state level having higher percentages spent at the local level, and vice versa. New York and Hawaii are good examples of instances of this trend.

I find it interesting that programs such as defense and welfare account for a significantly higher percentage of the GDP in 2010. With defense spending at the federal level reaching 6.15% of the GDP and welfare at 3.88% of GDP. It seems that if more funds were to be invested in education then welfare may be able to be reduced over the course of a few years, as the educated population increases, the number of individuals reliant upon welfare may decrease over time.

Of the 3.88% of the GDP that welfare accounts for, 1.34% was spent on welfare/unemployment in 2010. This is interesting to me because it is higher than the federal amount spent on education in the same year. Since much of unemployment welfare spending involves job training/workforce development programs, it seems that this money would be better invested in the education system to produce a more prepared workforce from the beginning, and preventing at risk individuals from falling into poverty through early education programs.


Sources:
http://www.usgovernmentspending.com/united_states_total_spending_pie_chart
http://www.usgovernmentspending.com/compare_state_spending_2011p20a
http://www.usgovernmentspending.com/federal_budget_fy11ps12011n_11s1li1n_20#usgs302