How To Reduce Federal Deficits

Like most Americans I want to educate myself in ways to reduce the deficit of this nation so I can sleep more sound at night. U.S. federal deficits should be reduced by cutting certain entitlement programs, implementing privatization, and increasing taxes on the rich. In this essay, I will provide hard facts that will not only reduce federal deficits, but also increase productivity and employment. These are specific ways to cut spending and raise revenue. Medicare, Medicaid and Social Security are the three of the government’s most popular and relied upon programs. Congress needs to curb the growth in spending on them and other entitlements. Entitlement programs have accounted for more than fifty percent of the federal spending since the 1980’s. It’s the biggest driver of the long-term national debt. Eliminate all the wast, fraud and abuse you can find. Over eighty billion is defrauded from these programs every year. Cut more out of discretionary programs, that includes defense. All these moves combined may not clear the national debt, but that’s because theyre not the main cause of long-term deficits. With an aging population and rising health care costs which in return there are fewer workers per retiree paying taxes into the programs. As a result speding on medicare, Medicaid, and to an extent Social Security will rise substantially absent structural changes. Most specifically in the way health care is delivered and reimbursed. When measured as a percent of the economy, spending on the three entitlement programs will rise to between sixteen percent and seventeen in 2035 from roughly ten percent of GDP today. We all want to think the only good reason is to ask the wealthiest to pay more in taxes to help with debt reduction. Solely relying on them, even in conjunction with some defense spending cuts, wont help nearly as much as some of us hope. Under the current tax code, their income tax rates would have to be jacked up to the nosebleed levels. That wouldn’t fly politically, nor would it make economic sense. The higher the rates are, the more they would likely affect economic behavior. This would reduce the deficit by eight hundred twenty nine billion spread out over the next ten years or eighty three billion a year. In this case, encouraging tax avoidance and discouraging otherwise growth spurring investments. That, in turn could reduce the revenue raised. Quite frankly, there just isn’t enough rich folks to go around. Their income is typically more volatile than most people’s. So when the economy sours or markets crash, so often does the taxable income of the howdy well to do’s. These are a few ways in reducing the national debt by increasing privatization. Privatizing federal businesses and infrastructure would allow new managers to extract greater efficiencies out of existing assets and to improve customer services. Private entrepreneurs can often innovate where government workers cannot. They can also more easily end unneeded and failed activities. By privatizing the postal service the postal rates and labor productivity will also rise. If the electric utilities would privatize, it would eliminate artificially low power rates that cause over consumption and would increase efficiency in utility operations and in capital investment. By proposing privatization it would change an industry from government ownership to public. Which in turn leaves room for improvement. While taxing the rich is always a society favorite it does make sense even if it only helps in the long run. Finally, with the reduction of certain entitlements, this proposes that fraudulence and abuse of these programs. I chose these three options because I feel very strongly that if they were to be implemented, that our government and federal deficit would piece together fully. The deficit would fall greatly and our economy would finally flourish. I don’t feel like the current effort has come to this sort of decision and won’t any time soon while Obama is in office, although he has made some sort of effort. I question as to why only around 45% of voters think, generally speaking, that the long-term federal budget deficit should be reduced by cutting spending. While another 36% think the better way to reduce is through a combination of tax increases and spending cuts.

Work’s Cited

Doherty, Daniel. “Poll: 45 Percent Say Spending Cuts Alone Are the “Best Way” to Reduce the Deficit.” Townhall.com. N.p., 26 Feb. 2013. Web. 3 Nov. 2013.

Holan, Angie. “FACTSHEET: Reducing the National Debt. “ PolitiFact. N.p., 10 Nov. 2010. Web. 3 Nov. 2013