Question

Federal budget deficits have been increasing since the 1970s and this could eventually affect the ability of the United States to meet its policy commitments. What is the most important step the nation could take to get on a fiscally sustainable path? Explain.

Answer 1

The goal of the policy makers should be toattain fiscal sustainability ie stabilization of the nation's debt. A stable debt to GDP ratio should be the main aim in order to attain fiscal sustainabilityThis would require 28%of increase in revenue and 22% of reduction in expenditure.The congress should keep the estate tax at its 2009 parameters and let the 2001 and 2003 tax cuts for upper income households come to an end as proposed by President Obama in his first budget.Other measures that would create increase in revenue like savings in social security ,and savings in major health care programs need to be taken . Health reform is important because rising expenditure in health care is the major cause of federal deficit.Thus the bottomline is that policy makers , in order to attain long term fiscal stability , should reform US health care system,bring reduction in federal expenditures and increase federal revenue by taxes.