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Socio-economic Effects of Reducing National Debt of the United States - Research Paper Example

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This paper talks about the effects of the possible tax hike for reducing the national debt and the negative implications this action would have for the welfare of the ordinary consumers of USA. The microeconomic theory concepts are applied to show the effects on price as well as quantities. …
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Socio-economic Effects of Reducing National Debt of the United States
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Download file to see previous pages Application of microeconomic theory especially the demand supply mechanisms will be applied to show the effects on price as well as quantities. 3. Processes of deficit reduction There has been different proposals being put forwarded by policy makers and the political parties towards debt reduction mechanism. The Republicans have claimed that a smaller government is required towards deriving a balanced budget (Erickson, 2012). Although it can be stated to be having some significance but the policy is rather far from being a panacea. The reason for this is that the Republicans have targeted towards too small of programs. When there was backing of legislation by the Republicans in curbing expenditure on the food stamp, there was only trimming of around $ 16 billion out of $ 80 billion food stamp budget. It has been stated that the proposals made by the Republicans do not possess the ability towards solving the woes of the nation’s fiscal conditions. There has been necessity of bigger reforms. The proposals as granted by Democratic parties in for tax hikes can be also stated to be far from panacea as well. It can be stated while the increase in taxes can neutralize the difficulties in budget but they are far from being actually neutralizing the problem all by them. On the surface it can be stated that the hike in taxes might be a good idea towards raising revenue simultaneously with the minimization of the income inequality gap. On further scrutiny it can be stated that the plan has also certain problems. The first problem is associated with the required breadth of the tax hikes. In the current situation the Federal taxes are around 18% of the GDP of the United States of America. For the purpose of balancing the...
The paper highlights the process of lowering the national debt which affects the everyday hardworking American citizens in almost every aspect of their lives.
There is a requirement of Federal law which directs that the Congress in United States of America possess the power of borrowing any amount of money which is required to pay for the programs which has been passed by the Congress of the country 75). There has been power given by the constitution towards controlling the expenditure as well as borrowing. The limit of debt or the ceiling in debt introduced in the World War I was targeted towards giving the Treasury towards provision of flexibility.
In 2011, the ceiling of debt has become the central ground for the conflict of budget among the Republicans who took control of the House in the elections of the year 2010. American President as well as Democrats refused in raising the limits without a deficit reduction package.
There was an impasse which was resolved a with a plan of broadening the spending cuts if there would be no working of the deal that could be worked out for a large scale reduction. There was so called sequestration cuts which was scheduled towards taking effect on January, 2013 but has been pushed back until the month of March, 2013 with the bill being passed on the Day of New Year for heading off the fiscal cliffs of the cuts as well as tax hikes.
There is a graphical explanation of the possible tax hike in the paper, that shows the adverse effects on the wage of the employees in the economy.
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