Discussion 4: Description Of The Recent Surge In Demand ✓ Solved

Discussion 4 Description In recent years, the surging demand

In recent years, the surging demand for public goods and services has encountered serious structural fiscal problems at every level of government in the U.S. The COVID-19 pandemic makes the situation even worse. The following are some examples that are heavily debated among budget officials and experts: Unsustainable National Debt Path, Growing Medicaid Cost, Pensions, Insufficient Infrastructure Investment.

1. Please pick one of the four issues and explain why it is a big threat to U.S. fiscal sustainability. (It is required to integrate assigned module readings. Please use APA in-text citation.)

2. To deal with these fiscal challenges, one option is to increase the taxes. Proponents of the tax increase say that adequate tax revenues are a prerequisite for making government function and "a functioning public sector is critical for a comfortable and civilized society" (Mikesell, 2011). However, some people argue that prudent funding would force the government to prioritize projects and eliminate waste. Should governments raise taxes? Why?

Paper For Above Instructions

The persistent and surging demands for public goods and services, particularly in recent years, have marked a critical intersection of fiscal challenges for the United States government. One of these challenges, specifically the issue of unsustainable national debt, poses a significant threat to U.S. fiscal sustainability. This paper will explore the implications of the national debt, its connection to fiscal challenges, and the broader implications of proposed tax increases as a potential remedy.

The Threat of Unsustainable National Debt

As of 2023, the United States national debt has exceeded $31 trillion, presenting an alarming rise considered unsustainable by many economists (U.S. Treasury, 2023). The current trajectory of national debt growth outpaces economic growth, which results in an increasing debt-to-GDP ratio that threatens economic stability. High levels of national debt can decrease the government's ability to respond to economic crises, foster inflationary pressures, and diminish overall investment in essential public goods and services, making it a critical issue for fiscal sustainability (Cohen & Gonzales, 2021).

The national debt's growth is correlated with several factors, including fiscal policies that favor tax cuts without corresponding spending reductions, rising healthcare costs, and the financial impacts related to the COVID-19 pandemic (Cohn, 2020). In addition to economic factors, political decisions around budgeting and fiscal policies often contribute to escalating debt levels, further complicating the quest for sustainable public financing (Gordon, 2022). At the structural level, the misallocation of resources or persistent deficit spending engages a vicious cycle of debt accumulation whereby increased debt prompts higher interest payments and future borrowing, constraining fiscal capacity (Committee for a Responsible Federal Budget, 2021).

Arguments for Increasing Taxes

To counteract this spiraling problem, proponents of increasing taxes argue that enhancing tax revenues is essential for a functioning public sector. Mikesell (2011) posits that adequate funding is vital for maintaining a civilized society, underscoring the importance of social services, infrastructure investment, and public safety that are funded by tax revenues. This view highlights the necessity for the government to prioritize essential programs that protect and enhance public welfare.

Advocates for tax increases suggest that such measures will contribute directly to decreased national debt levels. Historically, higher tax revenues have enabled more significant investments in public goods and services, leading to improved economic conditions (Bradford, 2021). Additionally, tax increases may create a pathway for reduced borrowing, thus stabilizing the national debt trajectory over time (Tax Policy Center, 2020). This fiscal stability is framed as essential for future generations as they will inherit the burden of current policies (Chapman, 2008).

Counterarguments to Tax Increases

On the other hand, opponents of tax increases argue that higher taxes may stifle economic growth. They suggest that instead of automatically raising taxes, the government should focus on eliminating waste and prioritizing spending (Cohen & Gonzales, 2021). By forcing the government to make difficult choices and cut unnecessary expenditures, it is posited that a leaner, more efficient government could emerge, which could balance budgets without burdening taxpayers (Gordon, 2022).

Moreover, the impact of aggressive tax increases on vulnerable populations cannot be overlooked. Critics argue that raising taxes, particularly on middle- and lower-income individuals, could disproportionately harm those who are already struggling, reducing disposable income and overall economic activity (Cohn, 2020). Hence, the necessity for careful consideration around the implications of any tax increase policy is paramount.

Conclusion

The U.S. faces a precarious fiscal landscape, and addressing the threat of unsustainable national debt is vital for long-term fiscal health. Increasing taxes could provide a necessary revenue stream to combat the debt crisis; however, a balanced approach addressing both revenue generation and expenditure rationalization may be required to promote sustainable fiscal policies. Employing careful analysis and evidence-based policies will be critical in determining the appropriate fiscal measures going forward.

References

1. Bradford, D. (2021). Economic implications of tax restructuring. Journal of Economic Perspectives, 35(4), 45-66.
2. Chapman, J. I. (2008). State and local fiscal sustainability: The challenges. Public Administration Review, 68(Suppl. 1), S115-S131.
3. Cohn, J. (2020). The debt and its impact on future generations. The Atlantic Monthly.
4. Cohen, K., & Gonzales, M. (2021). Balancing debt and growth: A critical evaluation. Fiscal Studies, 42(2), 99-125.
5. Committee for a Responsible Federal Budget. (2021). Fiscal challenges and the budget outlook.
6. Gordon, P. (2022). The politics of fiscal policy: Strategies for sustainability. Political Science Quarterly, 137(1), 67-88.
7. Mikesell, J. L. (2011). Fiscal administration: Analysis and applications for the public sector. Cengage Learning.
8. Tax Policy Center. (2020). Federal budget in tax policy center briefing book.
9. U.S. Treasury. (2023). The U.S. national debt: An overview and outlook.