The paper ” Federal Budget Challenge” is a wonderful example of an assignment on macro and microeconomics. My total budget deficit for 2015 is $309. 3B. This excessive reduction was brought about by huge cuts in defense (by $101B), intelligence (by $40B) and military operation (by $20B spending’s, while increasing tax rates on higher levels of income brackets. I increased medical research spending by $4B and the expenditure on NASA projects by $9. Individuals with salaries over $1m have their tax rates increased from 18. 4% to 20. 2% (this effectively reducing the deficit by $40. 5B). Other individuals with annual earnings above $100, 000 are charged the 5% new rate (this effectively reduces the deficit by another $46. 7B). I decided to increase the corporate tax to 15. 4% ($16. 5B reduction) and also charge a ‘ financial crisis’ fee (Colander 320) to large banks ($9B reduction), however, I did not tax ‘ carried interests’. Tax on fuel and Sugar products reduced the deficit by $66B, but an unchanged inheritance tax regulation increases by deficit by a further $9B. These reductions give me a projected budget deficit of $309. 3B for 2015. The percentage of long term Social Security deficit solved is 37. 5%, this is as a consequence of raising the limit on wages subject to the payroll tax to at least $156, 000 and choosing to increase the retirement age to at least 68. This would be quite tolerable for the federal government.
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A majority of my policy proposal includes moderate cuts in spending across all the sectors. The choices I made were based on reasonable and modest cuts that would allow for timely adjustments by the federal government. They were popular. A social security cut of $460B would provide additional revenue to the Social Security program, which, according to the Congressional Budget Office’s estimates, will not have enough income to fund the benefits that are due to beneficiaries under current law. Moreover, healthcare cuts (around $276B inclusive of Medicare) by providing a fixed voucher for beneficiaries to purchase private health insurance. Essentially this gives beneficiaries an incentive to choose the health cover that minimizes wasteful spending. Reduction in security and defense by $48B is justifiable. The huge investment in the intelligence agencies can fairly compensate for this cut. Raising additional revenue through aggressive tax reforms and keeping corporate tax within the US effectively reduces the 10-year budget deficit by $3. 3T (i. e. to a deficit of $4. 3T). An improved balance payment arises when the government doesn’t tax income from abroad.
The majority of cuts should come from overall spending, especially defense. Other cuts in spending can come from partial privatization of Social Security and possibly applying vouchers on Medicare in order to reduce financial strain. By gradually reducing spending on unnecessary Military operations, the government can use the money to fund social insurance programs in the future. Since the government is flexible enough to change tax regimes and spending levels, increasing the maximum taxable earnings for the Social Security payroll tax is advantageous (Colander 350).
People with income above the ceiling get to pay a smaller percentage of their total income in payroll taxes compared to people whose total income is below the maximum. Reducing interest rates to a normal level will allow the federal government to issue treasury bonds that help reduce budgetary deficits (Colander 339). I barely find myself sympathetic to the Treasury. As much as the Federal government has the flexibility to mobilize funding, inadequate financial planning, and management coupled with little data-driven decision making (for Social Security and Medicare), has been a major cause of the exponential budget deficit (Colander 354).