...Efforts to Reduce the Budget Deficit Melissa Hillard ECO203: Principles of Macroeconomics (BAJ1347A) Instructor: Kathryn Armstrong December 9, 2013 Efforts to Reduce the Budget Deficit Between the years of 1980 and 1993, budget deficits amounts increased and the national debt tripled. The public debt in this country has grown by more than $500 billion each year, in July 2012 nominal GDP was $15.8 billion. The ratio of debt reached a 10 year low in 1981 (32.8%) and went to 73% in 1993. By 2012 it was almost 100%. The actions taken by Congress since 1985 and the current debates between the Whitehouse and Congress, including what measures are necessary to address spending and revenue, will be reviewed. In 1981 President Reagan’s advisors proposed a 30% reduction in personal income taxes and an even bigger cut in corporate profit taxes. The actual result was a 25% cut in personal income taxes. At the time there was a conflict as to why the taxes were cut. There were several groups that had different opinions as to why President Reagan cut the taxes and what his expected results were. “Some supply-side economists argued that the increased incentives to work, save, and invest would actually result in increased tax revenues” (Amacher & Pate, 2012). Though there were some effects on tax revenue, there were not enough to offset the original tax cut. A second group believed that the purpose of the tax cut was to limit the revenue source that the government was...
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...Week 3 Assignment Teketreun Prince ECO 203 Principles of Macroeconomics Instructor Nathan Rondeau March 24, 2014 The efforts to reduce the deficit and debt in the United States budget has two different views. There is some politicians who think more spending is the best short term solution. The other side believe in a smaller government role will benefit the deficit and debt through a long term solution. In 1985, the deficit was over 200 billion and there was a plan put in place to reduce it. Aftermany years of talk about a balanced budget amendment to the Constitution, which would require a balanced budget on an annual basis,Congress passed the Gramm–Rudman–Hollings Act in 1985. (Amacher, R., Pate, J., 2012) This act was a strategic plan to reduce the deficit to zero in a certain time period. This act is a good guideline to start from, but it doesn’t project things like war or aids that usually sends the budget in another direction. The projection to the economy direction is important as well, in order to reduce spending and slowly repay the deficit. There is one group believes a cut in federal spending and small tax increase will reduce the deficit and debt quickly. This is one reason that deficit in the earlier years where reduce in a good timely manner with a small affect. The other group of people would like to increase taxes and spend more, in order to pay the debt off. The Clinton era was the last to have surplus in the federal government with a...
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...How To Reduce Federal Deficits Like most Americans I want to educate myself in ways to reduce the deficit of this nation so I can sleep more sound at night. U.S. federal deficits should be reduced by cutting certain entitlement programs, implementing privatization, and increasing taxes on the rich. In this essay, I will provide hard facts that will not only reduce federal deficits, but also increase productivity and employment. These are specific ways to cut spending and raise revenue. Medicare, Medicaid and Social Security are the three of the government’s most popular and relied upon programs. Congress needs to curb the growth in spending on them and other entitlements. Entitlement programs have accounted for more than fifty percent of the federal spending since the 1980’s. It’s the biggest driver of the long-term national debt. Eliminate all the wast, fraud and abuse you can find. Over eighty billion is defrauded from these programs every year. Cut more out of discretionary programs, that includes defense. All these moves combined may not clear the national debt, but that’s because theyre not the main cause of long-term deficits. With an aging population and rising health care costs which in return there are fewer workers per retiree paying taxes into the programs. As a result speding on medicare, Medicaid, and to an extent Social Security will rise substantially absent structural changes. Most specifically in the way health care is delivered and reimbursed. When measured...
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...originated at the Middle East. Crude oil is one of the inputs of production of many goods and services that much of the world comes from Saudi Arabia, Kuwait, and other Middle East Country that which included in the monopoly. Monopoly is one of the market structures that a firm is a sole seller of product without close substitute. When some event (usually political in origin) reduces the supply of the crude oil flowing from the region, the prices of oil rises around the world. Because they think that it would be much profitable to them. But since the U.S is much affected to the inflation of the oil it is not favourable for them. U.S. firms that produce gasoline, tires, and many other products experience rising cost, and they find it less profitable to supply their output of goods and services at any given price level. The result is a leftward shift in the aggregate-supply curve, which in turn leads t stagflation. The countries with large oil reserves got together as member of OPEC, the Organizational of Petroleum Exporting Countries. OPEC is a cartel—a group of sellers that attempts to thwart competition and reduce production to raise prices. And indeed, oil prices rose substantially. From 1973 to 1975, oil approximately doubled in prices. Oil importing countries around the world experienced simultaneously inflation and recession. The U.S. inflation rate as measured by the CPI exceeds 10 percent for the first time in decades. Unemployment rose from 4.9 percent in 1973 to 8.5 percent...
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...have been making significant cuts to state education in an effort to work to reduce the United States’ 10% deficit per year. Bill Gates argues that the long term equity from spending on education and healthcare far outweighs the equity from spending in other governmental areas. Gates’ solution to the problem is simple. His first proposal revolves around the idea of upgrading our tools and technology. In a country that spends more on education than most other countries, his ideas here are well deserved. Next, Gates believes that accounting for schools should be closer to Generally Accepted Accounting Principles and should be clear and honest. Gates argues that the current accounting method for schools follows a “buy now, pay later,” mentality. And, finally, Gates preaches that Politicians should be rewarded for their efforts to reduce the deficit. States have used many different methods to hide their ‘budget balancing’ accounting practices. Moreover, in future years, educational spending is projected to go up, perpetuating the already monumental educational budget deficit. This ongoing ‘debt clock’ should raise red flags to State Legislators to this systemic problem. Unfortunately, the only way to accommodate future generations and safeguard them from inheriting a massive educational debt, is to cut education spending in half, which, given our current position, cannot be our solution. So is there a way to reduce our educational spending, increase our educational revenue...
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...Twin Deficit For the past 2 years, India has been fighting slow growth, high inflation and the twin deficits – fiscal deficit and current account deficit. The current account deficit reached the peak of 5.3% of GDP in Q1 FY13 which is much beyond the comfort zone of 3%. The fiscal deficit has also proved difficult to control, leading to a large part of borrowing going into servicing the debt rather than towards capital intensive activities. Off late the threat of being relegated to the status of junk bonds has made the government to swing into action and try and take steps to curb the deficits. It is the result of these measures that the fiscal deficit is not expected to go much beyond the government target of 5.3% of GDP. As a part of its efforts, government has also come up with the target of reducing the fiscal deficit to 3% of GDP by 2016-17. In order to rein in on the fiscal deficit, under the direction of Finance Minister, government managed to cut expenditures to the tune of Rs.80000 crores. Besides this, unlike previous years government has managed to keep its stake selling program on track, which is expected to result in the revenue receipts of about Rs.30000 crores. However, the government has also been cutting corners and using financial jugglery to cuts the deficit. Transferring the subsidy payment bills onto the next year and one time receipts from stake sale in PSUs are not effective and long term solution. Apart from this, losses like those of State Electricity...
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...Not surprisingly the Joint Select Committee on Deficit Reduction or “Super Committee” was unable to reach any agreement about how to “cut” about $1.3 trillion from the federal deficit over the next 10 years. These “cuts” were required by the passing of the Budget Control Act of 2011 on August 2, 2011. The bill was the result of a compromise reached due to the logjam created in Congress regarding raising the debt limit ceiling. If Congress fails to produce a deficit reduction bill with at least $1.2 trillion in cuts, then Congress can grant a further $1.2 trillion increase in the debt ceiling but this would trigger across-the-board cuts called sequestration. These cuts would be equally split between security and non-security programs. The across-the-board cuts would apply to mandatory and discretionary spending in the years 2013 to 2021 and be equal to the difference between $1.2 trillion and the amount of deficit reduction enacted by the super committee. It is important to note that the act will not actually reduce the overall U.S. debt over the 10-year period it is specified for, only slow down the existing rate of growth of the debt. This is due to the fact that the cuts will not reduce federal spending in absolute terms, but rather reduce the year-to-year increases in spending from what had previously been anticipated. To put it more clearly, the “cuts” are merely a slowing down of the increase, rather than a decrease from current, actual, base-line spending. Personally...
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...The Federal Government’s Efforts to Improve the Economy Economic growth and employment are the basis for increased prosperity. Over the course of American history, there has been much debate regarding whether attaining that increased prosperity is (or is not) a direct reflection of imposed federal, state, and local tax policies. These tax policies are imposed for a variety of reasons, such as to reduce budget deficits, support war efforts, and strengthen the economy. It has become increasingly difficult, however, to ascertain which economic effects are true consequences of changes in tax policy. By reviewing the state of the U.S. economy over time and how growth and employment were affected by taxation, we can see how the Fed has engaged in economic policies. The Great Depression (1929 – 1939) The stock market crashed in 1929 and the Great Depression began. The United States economy spiraled downward as the government increased taxes (through the Tax Acts of 1932 and 1936 as part of President Franklin D. Roosevelt’s “New Deal”) in order to compensate for lost revenue. During this time, public opinion had been that the wealthy were shirking their fiscal responsibilities through aggressive tax avoidance. In response, President Roosevelt’s New Deal tax laws were designed to increase statutory and effective rates on the nation’s wealthiest citizens. The rationale behind the tax increases was that increased government spending without raising taxes would weaken...
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...1. Executive Summary France is one of the world’s five leading economies, as measured by GDP, has highly developed social and welfare model and is led by the socialist government. Though it scores well against numerous indicators of well-being, the state of economy is far from optimal. In this report we provide the brief economic outlook of France in 2014. It shows that the main challenges are the big budget deficit that leads to high government debt, too-high-taxes that slow the growth of the economy in all sectors, huge unemployment level and negative trade balance. Though in 5 years the economic situation is likely to improve comparing to today’s level, we forecast that the pace will be slower than needed. The structural reforms should be performed as soon as possible. We recommend use the supply-side policies, that concentrate on deregulation of the labor market, downsizing the government sector’ share in the economy by privatization of public enterprises and services, and lowering the tax rates. We believe these measures will help to boost the competitiveness of French companies and products in domestic and world markets, and will improve the growth of France’ economy in the medium and long term. 2. Current state of economy France continues to underperform in 2014. In October 2014 the ratings agency Standard and Poor’s lowered its outlook from “stable” to “negative,” saying its financial recovery is “elusive”. Main indicators please see in Appendix 5.1. GDP...
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...Work through the National Budget Simulation (http://www.econedlink.org/national-budget-simulator.php) in an effort to achieve a budget deficit of $1100B dollars. Scenario: The President of the United States has been elected on the promise of fiscal responsibility. By law he cannot reduce the net interest paid on the debt. The President's budget is projected to leave the country with a $1100B deficit. The United States is subject to global security concerns. At the same time, a lingering recession and financial markets rescue package reduces the government's tax revenues and forces the government to increase its spending on unemployment benefits, welfare, housing assistance, food stamps, and other need-based programs. Because of the increased spending and reduced revenues, the nation falls into a projected deficit of nearly XXX in 2015 (This is the first piece of the information you need to find). The President is committed to keeping his campaign promises in order to avoid future crisis over the US's financial standing. He must raise taxes, cut spending, or a combination of both to stay within his new guideline of a deficit below $1100B. The President turns to you, his trusted economic advisor, for help. (Note: While some events in this scenario reflect actual events, others are hypothetical for the purposes of this exercise. Budget figures in the simulation are actual White House figures of 2012, including spending and revenues of 2012.) Since the simulation is using...
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...unemployment * low inflation * rapid growth Employed: person over 16 * works for pay for 1 or more hour * works without pay for 15 or more hours * has job but temporarily absent Unemployed: person over 16 * not working * available for work * made effort to find work Not in labor: not looking for job Labor Force = employed + unemployed Population over 16 = labor force + not in labor force Unemployment rate = unemployed / labor force - underestimated in recession Labor force Participation rate = labor force / population over 16 Discouraged Workers: want to work but cannot find the work * drop from unemployed Discouraged worker Effect: * lowers unemployment rate and labor force Frictional Unemployment: due to normal working, job/skills * short run * can never be ZERO Structural Unemployment: due to changes in structure of economy * long run Cyclical unemployment: occur during recession and depressions Natural Rate of unemployment: normal part of the functioning of the economy * frictional + structural Cost of Unemployment: * not evenly distributed * rising prices -> erosion of domestic currency -> reduce money value Inflation: increase in overall price * inflation HIGHER than expected benefit DEBTOR * inflation LOWER than expected benefits CREDITOR Deflation : decrease in overall price Price Indexed: measure overall prices * CPI: average change over time in price...
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...National Legalization of Marijuana The United States of America (U.S.A) has a trillion-dollar deficit. They are consistently looking for ways to lower the amount of the deficit. Most Americans pay an additional tax on certain commodities, alcohol, and tobacco, commonly referred to as the sin tax. The nationwide legalization of marijuana for the tax revenue that the sale of marijuana will generate specifically earmarked for the reduction of the deficit, will be beneficial for the U.S.A. While the current population of the U.S.A. is 313.9 Million according to United States Census Bureau, and the World Bank (2012). Fifty percent of Americans, 156.95 Million, support legalization of marijuana. These numbers demand drug reform in this country. Half of the drug arrests, 850,000 Americans, where arrested in 2010. Eighty eight percent, 748,000 of those arrests were for marijuana possession alone. The current criminalization of marijuana undercuts future economic development. Incarceration reduces former inmates’ earnings by forty percent, devastating families and communities. Former users with an arrest record for possession of marijuana should not be prevented from obtaining employment, or from accessing social benefits. (Huffingtonpost.com 2014) Decriminalization of marijuana will allow for future economic development, and increase the tax base to further pay down the trillion-dollar deficit. Marijuana should be legalized nationally in the U.S.A. The general census is that the use...
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...address different economic problems through tax cut, decreased nondefense spending, increased defense spending and balanced budget. His policies brought success in stimulating the economy. He was able to improve the lives of the people and certain concerns during those times such as recession, unemployment and inflation. In 1985, while efforts have been made by President Reagan to uplift the economy, the US government was still beset by unbalanced budget due to deficits. Thus in his second term, he focused more in addressing this problem. However, the economic policies he implemented appeared to have created a setback in the country’s budget. In addition to the existing deficits prior to his term, deficits continued to increase. Objectives This paper aims to give an analysis on the cause and effect of the deficit problem Reagan faced in his second term and an analysis of the strategies he implemented in solving it. This paper also offers alternative strategies that would allow Reagan to reduce the deficits and balanced the budget. Analysis The Causes of the Budget Deficits This paper discusses three major cause of the budget deficit during Reagan’s term – tax cut, military spending and recession. The administration’s policy for tax cut was implemented to break the postwar trends to help the people and make an economic turnaround. Tax is the major source of...
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... The Measure of Ecological Footprint in Hopes to Reduce Human Consumption on the Earths Resources To: Benjamin Bradshaw GEOG*2210 (DE) S14 Environment and Resources From: Dhurim Gjureci 0678764 Thursday, July 17, 2014 The Measure of Ecological Footprint in Hopes to Reduce Human Consumption on the Earths Resources 1 GEOG 2210 S14 Dhurim Gjureci The Measure of Ecological Footprint in Hopes to Reduce Human Consumption on the Earths Resources By: Dhurim Gjureci Table of Contents What is Ecological Footprint? How is Ecological Footprint Measured? The Current State of the Earth Canada’s Ecological Footprint The Importance of Knowing Our Ecological Footprint Reduction Efforts Conclusion Bibliography Appendix/ Exhibits ...
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...also extend our heartfelt thanks to our family and well wishers. 2 CONTENTS ~Acknowledgements~ _________________________________ 2 ~Objectives of this project~ ____________________________ 4 ~ Brief detail about factor effecting India s growth ~ ________ 5 ~ Q1 - Infrastructure Shortages effects ~ __________________ 6 ~ Key Initiatives / Information ~ _________________________ 6 ~ Q-2 - Large Fiscal Deficit ~ ___________________________ 10 ~ The Indian scenario ~ _______________________________ 12 ~ Bibliography ~ _____________________________________ 16 3 ~Objectives of this project~ India s economy has grown very rapidly in recent years. Since 1991 it has been among the top 10% of the world s countries in terms of economic growth. The primary challenge for India is to sustain this growth while spreading its benefits more widely. This requires continuous effort as international experience shows that growth slows down unless reforms are pushed through when growth is high. To study major obstacles to India s growth are: 1. 2. 3. 4. Infrastructure Shortages Large Fiscal Deficit Restrictive Labor Regulations Unreformed Financial Sector 4 Brief detail about factor effecting India s growth We will concentrate and explain first two major factor or points and...
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