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Friday project - Assignment Example

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Ans) During a recession, tax collections are reduced and unemployment benefits are increased, which automatically stabilize the economy and this practice is being exercised for the last sixty years and this is the reason that no severe recession has been observed.
Ans) Yes, the…
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Friday project

Download file to see previous pages... make default crises more frequent; when a budget that is balanced at the start of the year falls out of balance during the year due to slower-than-expected economic growth or other factors beyond policymakers’ control, default could threaten if cuts large enough to restore balance can’t be passed swiftly and it proves impossible to secure a three-fifths vote to raise the debt limit. By the same token, the balanced budget amendment would not only undermine the automatic stabilizing function the federal government plays but would push in the opposite direction by requiring greater retrenchment when the economy falters. As a consequence, the constitutional amendment is likely to make recessions more frequent and deeper. The amendment also would increase the risk of a government default. It has often proved difficult to amass a simple majority in Congress to raise the debt limit so an impending default could be averted. The constitutional amendment also undermines majority rule, the basis for our democracy. The amendment would essentially enable minorities to engage in a form of extortion; they could threaten to plunge the nation into serious fiscal difficulty by refusing to help provide a three-fifths vote to waive the balanced budget requirement and raise the debt limit when a recession loomed, unless they were granted concessions on major policy issues as the price for their votes. A recent CBO study found that if deficits are held to two percent of the Gross Domestic Product through 2030, we will experience solid economic growth, and younger generations will be substantially better off than current generations. In fact, CBO found little difference in growth rates between such a policy and a policy of balancing the budget every year. It also is instructive that the goal Senator Bob Kerrey and former Senator Jack Danforth — both deficit hawks — set for the Entitlement Commission in 1994 was to limit the deficit to two percent of the Gross Domestic Product in ...Download file to see next pagesRead More
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