Question

In: Economics

What are the LONG TERM HARMS imposed upon our economy and our society by our government’s...

What are the LONG TERM HARMS imposed upon our economy and our society by our

government’s policy of borrowing over $500 billion each year (in 2020 dollars) every year—well,

almost every year -- since 1982? That is, what are the MANY, SEVERE HARMS CAUSED BY THE

DEFICIT? Please discuss at least ten harms. 2. Please rank each of these many, severe harms

from “MOST” harmful, in your opinion, to “LEAST” harmful, in your opinion, and defend your

ranking system. 3. Which groups in our economy are “hurt the most” by this yearly deficit?

Which groups are “hurt the least”? For example, let’s say that I am an old college professor

living in a house that is paid for, free and clear. Compare me to a 20 year old college student

just starting out in life. In theory, who is harmed more by this yearly deficit? Why?


1. Please list and discuss at least ten of the ‘PROPOSALS TO LOWER FUTURE DEFICITS’ that we discussed earlier, and feel free to include some ideas that we did not discuss. Please rank these ten—or more than ten---from “best” to “worst”, in your opinion, and defend your ranking system. 2. What criteria are you using as you rank these proposals? Some guiding principles include a) what is fair? Which groups in our society and in our economy should ‘contribute more’--- either in terms of higher taxes, or lower benefits, from our government? b) which ideas would MINIMIZE THE HARM to the American people? (the idea being that we do not want to hurt the millions of people who are barely making ends meet right now) c) which ideas are “big” ideas---in the sense that they would contribute “more” to deficit reduction, compared to other, competing ideas? Please include these “guiding principles” in your discussion, AND FEEL FREE TO INCLUDE OTHER PRINCIPLES AS WELL! 3. Why may it be wise to wait a year, or two, or three, or five, before implementing some of these proposals? 4. Why do some economists suggest that these ideas be part of a 20 year plan?

Solutions

Expert Solution

What are the LONG TERM HARMS imposed upon our economy and our society by our

government’s policy of borrowing over $500 billion each year (in 2020 dollars) every year—well,

almost every year -- since 1982? That is, what are the MANY, SEVERE HARMS CAUSED BY THE

DEFICIT? Please discuss at least ten harms. 2. Please rank each of these many, severe harms

from “MOST” harmful, in your opinion, to “LEAST” harmful, in your opinion, and defend your

ranking system. 3. Which groups in our economy are “hurt the most” by this yearly deficit?

Which groups are “hurt the least”? For example, let’s say that I am an old college professor

living in a house that is paid for, free and clear. Compare me to a 20 year old college student

just starting out in life. In theory, who is harmed more by this yearly deficit? Why?

answer -

The long term harm of the deficit on the economy can make the whol,e welfare to collapse .It leads to Reduce savings and investment .when the federal government run a large borrowing /deficit , it reduces the national savings and result in lower investment.This ultimately leads to more consumption ,slow economic growth and low income of the people in the future time .It is even harmful to a country whose economy is having capital free to move to its most productive in use .The long term harm leads to higher interest costs which displaces other prioritiees and it can spirall out of control.It make the politicians to devote resources to needed public investment that can only strengthen the future economy of the country.The higher interest rate sqeezes the spending which ultimately leads to the more consumption of low income and moderate income families.

Top ten harms of the deficit

  1. The return of the trillion dollar deficit- The CBO had projected that the dificit will increase and rise to about 1.4 trillion dollar b y the year 2029 which will result in an accumulatibve deficit of 12.2 trillion dollars by the year from 2020 to 2029 for a 10 year period
  2. Deficit reduces the saving and the National investment - MOst harmful - it lower national savings and investment when federal takes or run large deficit ,more consumption by the moderate and low income families ,slower economic growth
  3. It cause Higher interest cost which displaces other priorities and spiral out of control -Most harmful - squeezed the spending ,make it difficult to devote resources to needed public investment
  4. It cause Reduced Fiscal room for contigencies -Most harmful -The more the government borrows and spends , there will be alwyas a less room for the time when the country is in a situation of National disaster and unexpected crisis.Causes severe and hit the economy badly at that point in short term or may be long term
  5. Enhanced risk of crisis - Most harmful - US is richest country but is not fully immune to the deficit part of the country.Increase in deficit will increase the risk of creditor demand to higher premium buys .It will cut benefits , surge in interest rates , blunt measure to take, raises taxsex to cut deficit.
  6. weak fiscal foundation to economy - Moderate harmful - with weak foundation of fiscal will leads to weak economy of the nation.It will lessen the opportunbity , prosperity , less capital , less resources for private and public investment .
  7. Unemployement rate - Moderate harmful - Increase taxes leads to less production and supply , less imports , which will ultimately will cause the employement to reduce , the wages will reduce due to high demand of employees
  8. GDP recovery - Moderate harmful - It will take GDP five to ten years to recover to a better position if the action is not taken against the GDP and have to lesses the deficit using the fiscal policies .
  9. Protection of essential safety assets - Least harmful - The deficit causes threat to the safety net and most vulnarebale in our society.The essential programs which is needed the most would be jeopardise if the govt. does not have the sufficient resources
  10. Key investment in future will be at risk -Least harmful- less invest will be in the r and d , infrastructure , education in the future because of the debt.
  11. The return of the trillion dollar deficit- The CBO had projected that the dificit will increase and rise to about 1.4 trillion dollar b y the year 2029 which will result in an accumulatibve deficit of 12.2 trillion dollars by the year from 2020 to 2029 for a 10 year period

HAVE A GOOD DAY !


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