Question

The mandatory spending items (e.g. Medicaid, Medicare, Social Security) are increasing more rapidly than the discretionary spending portion of the budget. What reforms would you propose in order to constrain government spending and reduce the national debt? (The increases to Social Security are not supposed to be included in the U.S. national debt. The unfunded liability (future payments) for Social Security is supposedly held in the Social Security Trust Fund.)

Answer 1

The reforms that can be taken up by the government include:

1. Reduce the military spending by the government. One of the ways debt can be reduced is by shifting the military spending to spending on social goods like education.

2. If the government ensures that the economy goes faster than the debt, the national debt can be reduced. When the economy grows rapidly, the government also earns through increase in non tax revenue because of an increase in the consumption of goods and services.

3. Governments often issue bonds to reduce debt. The US government can also follow this method to reduce their national debt. However, it should be kept in mind that interests have to be paid to the creditors.

4. There can be reforms made to programs like Medicare. It is possible to reduce the spending by government for this program without reducing the benefits of the initiative itself. There is a possibility for reducing the costs beared by the government by reducing certain expenditures without reducing the quality or benefits of the initiative.