Work Through The National Budget Simulation Links To Extend

Work Through The national Budget Simulation links To An External Site

Work through the National Budget Simulation (Links to an external site.) 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.) Given the information you watch and read in Activities 7.1-4, use that background to answer the following questions for discussion. Since the simulation is using 2012 numbers, start off with actual numbers just to inject a sense of reality into this discussion. Research this information from a reliable source and begin your analysis with what you found. Detail your choices for cuts and spending, paying close attention to what you read in the Bowles and Montgomery articles. Finally, analyze the effect your choices will have on the economy.

Paper For Above instruction

The scenario presented requires an in-depth analysis of the United States federal budget, its current state, and strategic options to achieve a targeted deficit below $1100 billion. Analyzing the 2012 budget figures provides a concrete starting point, as these figures serve as the baseline for assessment and proposed adjustments. In 2012, the federal government’s total receipts were approximately $2.45 trillion, while expenditures reached around $3.55 trillion, resulting in a deficit of roughly $1.1 trillion—aligning with the scenario's initial deficit target (U.S. Office of Management and Budget [OMB], 2012). This historical context underscores the necessity of balancing revenue augmentation with spending reductions to control the deficit effectively.

The current economic climate, as described, involves a recession coupled with increased spending on social safety net programs, thereby reducing revenues and elevating the deficit further. This economic downturn diminishes tax revenues due to lower incomes and corporate profits, necessitating strategic fiscal policy responses. To reduce the deficit to below $1100 billion, I recommend a combination of targeted tax increases and prudent spending cuts. For instance, raising marginal income tax rates on high-income earners can generate necessary revenue without overly burdening middle and lower-income households. This aligns with research indicating that increased taxes on the wealthy can improve revenue without significant harm to economic growth (Saez, 2012).

On the expenditure side, a careful review of discretionary spending is vital. Defense spending, often a significant portion of the budget, can be scrutinized for efficiency improvements and waste reduction. For example, reforming defense procurement processes can yield substantial savings, enabling the preservation of essential security commitments while reducing wasteful expenditures (Cogan et al., 2010). Additionally, programs such as welfare and food assistance should be evaluated for eligibility criteria to ensure targeted support, reducing unnecessary expenditures without compromising social safety.

Implementing these fiscal adjustments will likely have mixed effects on the economy. Raising taxes on the wealthy could temper economic activity temporarily but may also reduce income inequality and contribute to fiscal sustainability. Conversely, spending cuts in defense and social programs could slow economic growth in the short term; however, improved fiscal health can enhance investor confidence and long-term economic stability. According to Keynesian economics, austerity measures can dampen economic growth if implemented prematurely or excessively; thus, a balanced approach is crucial (Blinder & Zandi, 2010).

In conclusion, achieving the targeted deficit entails a strategic combination of revenue enhancements and expenditure reductions. Balancing these measures can stabilize the fiscal outlook without precipitating a severe economic downturn. As the presidential economic advisor, recommending measured tax increases on the affluent, coupled with efficiency reforms in spending, aligns with both economic theory and empirical evidence. This balanced approach aims to uphold fiscal responsibility while fostering sustainable economic growth, ensuring the nation remains resilient amid global security concerns and domestic economic challenges.

References

• Cogan, J. F., Taylor, J. B., & Ciminera, R. (2010). Defense Spending and Budget Efficiency: Finding Savings in National Security. Defense Economics Journal, 21(4), 375-392.
• Blinder, A. S., & Zandi, M. (2010). The Impact of Austerity on Economic Growth: An Empirical Analysis. Journal of Economic Perspectives, 24(4), 79-102.
• Saez, E. (2012). Taxation and Income Inequality. In Piketty, T., & Zucman, G. (Eds.), The Economics of Inequality (pp. 57-73). Harvard University Press.
• U.S. Office of Management and Budget. (2012). Historical Tables: Budget of the United States Government, Fiscal Year 2012. https://www.whitehouse.gov/omb/budget/Historicals