Question

In: Economics

You are now the President-elect of the United States! You campaigned on a platform of fiscal...

You are now the President-elect of the United States! You campaigned on a platform of fiscal discipline and balancing the budget. Now that you are president-elect, name one revenue initiative and name one spending initiative that you will be pursuing towards balancing the federal budget.  describe why you believe each of these two initiatives will help to balance the federal budget, reduce the deficit and, in turn, ultimately help to reduce total federal debt.

Solutions

Expert Solution

A balanced budget is a budget in which revenue equals the expenditure. Now the United states run with the deficit budget in which spending exceeds the revenue. The major source of revenue is taxes including income tax, social security tax, payroll tax, excise tax, estate tax etc. On the other hand government spending consist of three major components. They are

  • DISCRETIONARY
  • MANDATORY
  • INTEREST ON THE DEBT

Unlike the discretionary, the congress cannot change the mandatory estimates. The interest payment constitute the third component and it must be paid. The major reason for higher deficit during recent period is the high spending from the part of government especially spending on national defense.

The government can efficiently balance the budget by reducing defense spending. The government usually put high national budget spending in order to protect the country. Since now a days peace is restored and US dominate the entire world, the government can think of that option.

Tax cut are the new trends. But this drastically cut down the government revenue. To solve this, government should introduce programmes and policies both in public and private sector that create employment and income in the economy. This ultimately increases the growth and revenue of the economy. In order to maintain a high order tax system, government could introduce administrative policies and infrastructure that brings more tax base. In the long run this also expand the public revenue. All these policies would lead to a balanced federal budget


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