Question

The United States is over $22 trillion dollars in debt, with year after year of deficits adding to that total. There is no easy solution to this national crisis- You can cut spending but which federal programs will lose their funding? Or you can raise taxes, but that means less money in American's pockets- Regardless of the proposed solution, unintended consequences will arise. What strategy should the national government utilize in order to get America out of debt? Balanced budget amendment; raise taxes but on who; cut spending but on what? At least 250 words

Answer 1

The Government can adopt following methods to reduce debt:

• Governments can issue debt in the form of bonds to raise money.This enables them to avoid raising taxes and provides money to pay expenditures, while also stimulating the economy through public spending, thus generating additional tax income from prosperous businesses and taxpayers. However it will have to pay interest and borrowed money back at some point of time.
• Government can use the method of Quantitative Easing which involves buying back the bonds that were issued. However, this method is more effective during short term as compared to long term.
• Raising taxes is one of the most common method to collect more revenue. It can raise taxes like sin taxes on alcohol and tobacco products, corporate tax, estate tax, Federal Insurance Contributions Act (FICA), and property taxes.
• Reducing Government expenditure is also very helpful in reducing the national debt. Some examples are Freezing the salary and benefit levels of federal employees, providing block grant education funding and welfare to the states, hiring one new federal employee for every two that retire from government employment, putting every federal transaction and contract online in real time thus cutting wasteful expenditure etc.
• Bailouts and debt defaults can also help a government solve a debt problem. However there are certain disadvantages associated with these methods.

To conclude Government can adopt combination of policies in order to reduce national debt, instead of focussing on a single policy.