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Running the Government without Debt - Essay Example

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Running the Government without Debt Running the Government without Debt Introduction A government without debt is not an unimaginable concept. There are precedents in the federal government (US) where the period from 1998-2001was a surplus period…
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Running the Government without Debt
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Download file to see previous pages However, what is equally disturbing is that the US government moved away from surplus budgets during the latter period and never even gave it a rethink. There has been a marked tendency to succumb to populist agendas and vested interests which marked the post-surplus era in the US economy. In most cases, ‘popular sentiment’ is but a facade for narrow political gains. This era has seen a marked increase in spending, not only for new ventures but also for cutting down unnecessary and wasteful expenditure. While running a government without debt is likened to running a company, we conveniently forget that a company does so out of a lack of choice. No company can afford or receive the luxury of unlimited credit and ultimately should plough its profits back into the system. Only in the rarest of rare cases can a company expect a bailout package. However, such measures are time bound and come at a price. Hence, a balanced or surplus deficit is the only way out for a sound financial system. 1. Curtailing Big Spending The three areas that can directly impact federal spending are defense, social security, health care and interest on debt. Striking at these revenue guzzlers will eliminate the need for deficit budgets. As the saying goes, a penny saved is a penny earned. Defense seems to be one area of spending where the only way is the way up. After the end of the cold war era, the need for maintaining massive armaments has become irrelevant. The US, with its relative isolation from Europe, Asia and Africa does not require increased spending in arms either in the long or short term. Intervention in foreign countries should be brought down to the barest minimum. Instead of unilateral incursions into certain nations, the US should focus on diplomatic initiatives as a measure to reform them. This would keep public anger at check by reducing losses and reverses suffered by the military abroad. The use of the armed forces should be restricted to peace keeping and for ensuring that humanitarian aid reaches the intended target. The nation’s nuclear arsenal should be used only as a deterrent and not to encourage an arms race among states. Social Security is another area where reforms are called for. The ceiling on payroll tax should be removed so that income over the threshold limit can be brought under the tax net. Gradually raising this rate can cover the shortfall in this area over the course of time. With a graying population, one should take a serious note of the retirement age. This should be gradually and progressively raised to 75 to compensate for the additional expense incurred by maintaining the present retirement age. Likewise, we need to identify the extent of retirees who are affluent enough to either be taxed or have their benefits curtailed. Health Care is the third area which can do with cost cuts. As Cox (April 5, 2011) reports in CNBC, there is a need to shift the burden on Medicare and Medicaid spending from the patients, and thereby the state to the providers of health care i.e. hospitals. As in the case of social security, the age for eligibility to Medicare can also be increased from the present 65 to reduce costs. Debt Interest is the area that could seriously affect the debt levels over time. With more public debt owned by foreigners, interest payments leave the country rather than circulate within the nation if US citizens received the interest on debt. 2. Increasing the Revenue Directly increasing the revenue by ...Download file to see next pagesRead More
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