American National Government - Coursework Example

American National Government Introduction Debt crisis is a term that that is often used to refer a proliferation of colossal public debt that is relative to the tax revenues. The report has provided substantial reasons that have brought a debt crisis in the country. America is known to have citizens who are hard working with the aim of continually improving the economy of their nation. However, there come a hard time when the citizen must tighten their belt to maintain the economy amidst difficult hurdles. The country has a belief that they cannot be great if they are broke. Moreover, their workers not being able to compete successfully in the competitive world if they do not have proper plans to get off the crushing debt burden off their shoulders. The Americans are persistently calling upon their leaders to put politics aside and work together toward a common goal. In addition, they must agree to plan and live with the citizen’s means to make America strong for the long haul. America is in a continuous unsustainable fiscal path, and this is because the expenditure is rising in the country while the revenues are falling down. This ultimately leads to the government to borrow large amount of money every year to make up for the difference. The government accepts that they are in a staggering deficit concerning the overall national gross domestic product. For example in the year 2010, the federal government spent an amount that was nearly 24 percent of the country gross domestic product while the tax revenue was at 15 percent of the gross domestic profit. The reports further elaborate that the revenue that was collected was below the budget, which further explains the deficit that the country faces. This was outrageous because the last time that was witnessed in the country was during World War II when the government was spending a larger part of the countries income. The federal debt has increased dramatically since 2001, and this is blamed on the two wars and a slew of fiscally irresponsible policies coupled with a deep economic downturn. These aspects have led the country to rethink outside the box and arrive at the decisive moment to help in boosting the economy that is almost on the verge of collapsing. The federal spending is blamed for the persistent economic downfall; therefore, a major overhaul in the spending way of the federal must be carried out. It is a fact that even if the citizen work hard to recover the economy by increasing the net revenue but the federal government increase its spending and borrowing the deficit will ultimately remain. The health care cost shall continue to rise and will balloon more when the currently young generation shall retire. It is projected that the economy will be much worse by 2025 because the baby boomers shall be paid some of their interest in the Medicare and the social security. Moreover, the borrowed money shall pay all the activities taking place in the federal government. In essence, the public will outstrip the entire America economy. Since the mandatory payments will not be buying any services or goods that can boost the economy but it will squeeze out funding for all priorities in the country. The continued rise of the federal debt that is unsustainable will drive up the interest rate for all borrowers in various disciplines. Foe examples the business people and individuals will face a hefty interest rates thus curtails the economic growth by crowding out private investments. It will be very expensive for most entrepreneurs and other small business enterprise to raise capital, innovate and create jobs as well as reducing the per capita of individuals to as much as 15 percent. The rising debt level will strangle the government by depriving it of the required resources needed to respond to the future crises and investment, as well as other properties. It is imperative to note that the federal government will face difficulties in borrowing funds at friendly interest rates if the national debt grows higher. Moreover, an enormous debt puts the country in jeopardy by exposing it to the foreign creditors who currently own half of the public debt. By paying the interest to them, the overall life and living standards of the citizens shall reduce. In addition, of having massive debts the able investor will lose confidence in the nation’s ability to pay loans that possibly triggers a debt crisis thus forcing the government to implement stringent austerity measures. The reality facing us is that if the government and the entire American citizen do not act now to reassure the market. Then the risk will increase and the options at hand to avert the crisis will be narrow and become stringent. The CBO projects that the country’s economy shall shrink by 2 percent in the next ten years thus increasing the spending cuts and increasing tax. To tackle this menace of debt crisis the government must bring the budget into primary balance and improve the long-run fiscal outlook by 2015. One of the major plans to bring down the deficit is for the government to rein in discretionary spending. This means that all the aspect in the discretionary budget must be well scrutinized, and no programs that spend too much and achieves very little will be spared. Therefore, the government must be willing to do more with fewer amounts and live within its limit. Despite the fact the government must invest, it must be done wisely in a transparent and accountable manner to avert debt in the coming years. The discretionary spending cap shall also continue to demand the efficiency from all government bodies by holding the spending growth to approximately half the rate of inflation. Such an approach helps in bringing the spending under control as fast as possible. Tax code is another major area that must be reformed since the chain is broken. Currently, the tax code presents citizens with perverse economic incentives instead of a fair level playing ground. Moreover, the income tax system is in the verge of collapsing since it is complicated since it requires taxpayers to make several computation see if they qualify for the benefits or penalties. The tax reforms include lowering the rates by broadening the base and cutting spending in the tax code. To achieve this, the tax reform must reduce the size and number of tax expenditures by reducing the marginal tax rate for the citizens and corporations. Reducing the deficit will lead to a reduction of the debt. This can be achieved by sharing the portion of savings from the cutting tax expenditure. America should be made the best place to start a business and creating jobs, since those stakeholders involved will be paying tax, which shall be used to sustain and grow the economy. This can be achieved by revising the tax code to help the American-based multinationals compete in other foreign lands fairly. The federal health care service spending represents the largest fiscal challenge in the end. It is because as the current young generation retires and the overall health care cost steadily grows faster than the economy. Then the federal government spending shall balloon overwhelmingly. It is projected that the federal health care spending for Medicare, children’s health and other insurance programs shall grow from nearly six percent of GDP in 2010 to a staggering 10 percent in 2035. This can be prevented by reforming both the physician payment act and a class act as well as finding savings throughout healthcare system to offset their cost. Moreover, several reforms should be done to reduce federal health spending and decrease the growth of health care cost in a broader way. They include increasing government authority and funding to reduce Medicare fraud. Restricting first-dollar coverage in Medicare insurance, extending the Medicaid drug rebate to eligible’s and reducing excess payments to hospitals for medical education among others. The economy should grow by double-digit annually to meet the goal of averting the debts. Therefore, to achieve this government must promote economic growth as well as not undermining the economic growth. Fostering economic growth can be achieved through reducing the deficit gradually to avoid shocking the fragile economy, by reducing large nominal cuts. Establishing a credible plan to stabilize the debt can have a better effect on the economy. This will help to alleviate the interest rate and to mitigate the uncertainty among businesses and individuals. Implementation of a pro-growth tax and spending policies some of the better ways of fostering economic growth since it will help in continuously reprioritizing spending towards investments (Bowles and Simpson, P. 43). The commission’s plan of actions and recommendations to avert a debt crisis was very vast and in-depth. Moreover, most of the commission’s recommendations were in aligning with the rule of SMART (specific, measurable, attainable, realistic and time-bound). There were some recommendations in which there practicability can be a hurdle. For example, the discretionary spending cuts that required both the security and non-security spending to be shared equally. It is good to note that the country will have a faster economic growth when its security is stable. It will attract several investors who shall invest in the country thus boosting the economy. Therefore, a large sum of money will be used to maintain security in the country thus making it difficult for both security and non-security spending to be the same. Similarly, the requirement of the president to limit war spending is farfetched since nobody can tell the dimension in which war is going to take. Therefore, to avoid losing war the country must support the army accordingly. Other recommendations were within the range of practicability and implementation. In conclusion, implementing the entire proposal can make America meet its dream of averting the looming debt crisis. It will make America be the best hub for both business and living. In addition, it will make the future generations coming in America to experience increase their livelihood because they shall not do not have debts to pay. These entire proposals can be achieved when the government and the whole American citizen work towards a common goal regardless of their political divide. Work cited Bowles, E, and A Simpson. The Moment of Truth: Report of the National Commission on Fiscal Responsibility and Reform. N. p., 2010. Print. Read More