Question

What are the important factors that we in the United States should consider in addressing our short-term and long-term budget problems?

Answer 1

There are different factors that should be considered in the given scenario. The first factor is the impact of the solution used to resolve the short term and long term budget problems. A reduction in government spending, causing decrease in development program spending, affects poor people and increase in revenue via wealth tax, affect rich people. So, different measures have different impacts, that should be considered. The second factor is the trade off between spending and revenue collection while resolving the budget problems of different time period. Excessive inclination towards the spending or revenue, may create imbalance and it is not good for the economy. The third factor is the impact upon the coming generations in terms of higher deductibles and or lower social security benefits for them. Measures to rectify the budget problems, should not overburden the future generations. Further, the factors like current account balance in the BOP, should also be considered while resolving budget problems.