StudentShare
Contact Us
Sign In / Sign Up for FREE
Search
Go to advanced search...
Free

Main Reasons of Crisis and The Moment of Truth - Coursework Example

Cite this document
Summary
This coursework "Main Reasons for Crisis and The Moment of Truth" describes reasons for the debt crisis, solutions to solve the problem, aspects of Moment the Truth, arguments for solutions working. …
Download full paper File format: .doc, available for editing
GRAB THE BEST PAPER93.6% of users find it useful
Main Reasons of Crisis and The Moment of Truth
Read Text Preview

Extract of sample "Main Reasons of Crisis and The Moment of Truth"

Affiliation: The Moment of Truth Part General reasons for the debt crisis The first reason for the debt crisis results from the unsustainable fiscal path that America faces. Issues of rising spending and revenues falling short contributes to uncertainty, thus subjecting the government into borrowing huge sums of cash on yearly basis for making up the difference. For example in 2010 alone, the federal spending consumed nearly 24% of the Gross Domestic Product (GDP), which equaled value of goods and services produced in the economy. The only time this somewhat excessive spending occurred was during the World War II. The tax revenues were able to stand at 15% of the GDP in 2010, which was the lowest level since 1950. Therefore, the existing gap between spending and revenue, representing the budget deficit, was exactly under the 9% of the GDP. Another reason contributing to the debt crisis is the increased expenditures on wars and the slew fiscally irresponsible policies, accompanied by the deep economic downtime. In this case, the nation has arrived at ‘moment of truth’ of which it is not even justified to blame the political party. There are expectations that the economy will help towards improving on the deficit situation in the short run basing on the fact that revenues will rise upon people going back to work. In this case, money that is subject to spend on the social safety net will most likely decline since fewer people will be forced into relying on it. Even though the economy might recover, projections indicate that the federal spending will most likely increase faster than the revenues. In this case, the government will have no other option but to continue borrowing money for expenditure. Another factor contributing to the debt crisis is the cost of healthcare. All of it results from the retirement of baby boomers over long run, contributing to the continuous growth of the health care costs. Projections indicate that by 2025, the revenue generated will only be able to finance on the interest payments, Medicare, Medicaid, and Social Security. All other federal government activities, starting from the national defense and the homeland security, extending to the transport and energy sector will have to rely on the borrowed money when doing payments for services. At this time, debt of which the public will be outstripping the entire America economy, expected to grow to over 185% of the GDP by the projected period of 2035. Similarly, projections indicate that interest on debt will rise to reach nearly $1 trillion by 2020. Encountering these mandatory payments, of which do not buy goods or services, will end up squeezing out on the funding of all other priorities. Another reasons contributing to the debt crisis is that the federal debt remains unsustainable by itself. The level of unsustainable debt ends up driving up on the interest rates of all borrowers, be it businesses and individuals, thus curtailing on economic growth by crowding out on the private investment. As it becomes more expensive for the entrepreneurs and the businesses into raising capital, participate in innovation and creation of jobs, the rising dept could end up reducing on the per-capita GDP. It thus implies that the share of nations’ economy by each American will increase by as much as 15% come 2035. Such issues of rising debt will also end up hamstringing the government, thus depriving it on the resources required for responding to the expected future crises and depriving on the possibility of investing in other priorities. Deficit spending is commonly in use at responding on the short-term financial ‘emergency’ needs, but as the national debt keeps on growing, the federal government will encounter difficulty in borrowing funds through affordable interest rate, thus preventing on the effectiveness of responding to emergencies. Part 2: Overview of the proposed solutions offered by the authors The main agenda of the proposed solutions is to bring the budget back to the primary balance (balance that include interest costs) by 2015, and be able to meaningfully improve on the long-run fiscal outlook. The recommendations offered by the authors are able to accomplish on these goals, while keeping on mind a number of key principles. Some of the principles include making America better for tomorrow, avoiding any disruption on the fragile economic recovery, protecting on the truly disadvantaged, cutting on spending that are hard to afford, among other principles. In this regard, the authors of this report were able to propose the six-part plan that would help in putting the nation back to the fiscal health, promoting economic growth, and protecting on the vulnerability of America. When taken as a whole, expectations are that the plan will; Be able to achieve nearly a $4 trillion deficit reduction by 2020, which will be more than any other effort in the entire history of the nation. Be able to reduce on the deficit to 2.3% of the GDP by 2015, which will exceed on the President’s goal of achieving a primary balance of about 3% of the GDP. Be able to sharply reduce on the tax rates, and then abolish the AMT, and achieving cut on the backdoor spending in the tax code. Be able to cap revenue at 21% of the GDP and achieve a spending that is below 22% and eventually reach 21%. Be able to ensure on the lasting Social Security solvency, followed by preventing on the projected 22% cuts when it reaches 2037, achieve reduction on elderly poverty, and distribute on the burden fairly. Be able to stabilize on debt by 2014 and see a reduction on debt to 60% of GDP by 2023, and a further 40% by 2035 (The Moment of Truth Report 15). As the proposed strategies of solving the debt crises, the plan proposed by the authors has the following six major components; 1) Discretionary Spending Cuts – the plan here is to enact some tough discretionary spending caps that will force maximum budget discipline in Congress. The components includes enforcement mechanisms that provides the limits real teeth, followed by making significant cuts to the security and non-security spending through cutting on the low-priority programs and streamlining on the operations of the government. 2) Comprehensive Tax Reform – the plan here is to have a sharp reduction on the rates, broaden on the base, simplify on the tax code, and see a reduction on the deficit through reducing on the many ‘tax expenditures.’ It is also apparent to introduce reforms on the corporate taxes as way of making America become more competitive, and cap on the revenue to avoid on the excessive taxation. 3) Health Care Cost Containment – the plan here is to replace the phantom savings from the initially scheduled Medicare reimbursement cuts that have the likelihood of never materializing. Basing from the new long-term care program, the common sense reforms to the physician payments, cost sharing, then the malpractice law, the prescription drug costs, the government-subsidized medical education, together with other sources. There will be need to institute the additional long-term measures that will be able to bring down the spending growth. 4) Mandatory Savings – the plan here is to cut on the agriculture subsidies and modernize on the military and civil service retirement systems. The same time will see the introduction of reforms in the student loan programs, followed by putting the Pension Benefit Guarantee Corporation on to a sustainable path. 5) Introducing Social Security Reforms that would Ensure Long-Term Solvency and see a Reduction on Poverty – the plan here is to ensure there is a sustainable solvency for the next 75 years, while at the same time reducing poverty among the seniors. 6) Process Changes – the plan here is to introduce reforms on the budget process as a measure of ensuring that the debt will remain on a stable path. Another expectation is that spending will remain in control, with inflation measured accurately, while the dollars of the taxpayers go to where they should belong. Part 3: Arguments on why some of these solutions will work In an individual opinion, I think most of the proposed solutions have the likelihood of working well as planned, but others would fail due to the difficulties surrounding those specific areas. The first solution of disciplinary spending cuts would work in that it is possible to tell and contain areas of unnecessary spending. It is possible to make the Congress follow maximum discipline on the expenditure of federal funds through ensuring maximum accountability and transparency in the expenses. The second solution of introducing comprehensive tax reforms would also work. This is because it is the area contributing to the accumulation of debts. Finding a permanent solution that would see a standardization or reduction on loan rates and simplifying the tax code would directly contribute to the reduction of debt crises. I think the third solution of health care cost containment would not work. This is because health care is the most dynamic region with many arising complexities. It is hard to monitor and regulate the entire health care sector without having room for major adjustments. Mandatory saving is another plan that I think would not work. This is because there is no guarantee of achieving an effective balance after introducing agricultural subsidies and modernizing on the military and civil service retirement systems. Looking at the fifth solution of introducing social security reforms, I highly think this plan would work in that it is an effective strategy of achieving long-term solutions to issues of poverty. Early plans and changes through reforms always end up offering permanent and reliable solutions to future problems. Finally, I think the last solution of process changes is another area that will work in solving the debt crises. This is because introducing reforms in the entire budgetary process will end up saving on the unnecessary expenses, which will directly reduce on the debts that the nation has to deal with in its daily operations. Works Cited The Moment of Truth: Report of the National Commission on Fiscal Responsibility and Reform., 2010. Read More
Cite this document
  • APA
  • MLA
  • CHICAGO
(Main Reasons of Crisis and The Moment of Truth Coursework - 2, n.d.)
Main Reasons of Crisis and The Moment of Truth Coursework - 2. Retrieved from https://studentshare.org/macro-microeconomics/1871221-the-moment-of-truth
(Main Reasons of Crisis and The Moment of Truth Coursework - 2)
Main Reasons of Crisis and The Moment of Truth Coursework - 2. https://studentshare.org/macro-microeconomics/1871221-the-moment-of-truth.
“Main Reasons of Crisis and The Moment of Truth Coursework - 2”. https://studentshare.org/macro-microeconomics/1871221-the-moment-of-truth.
  • Cited: 0 times

CHECK THESE SAMPLES OF Main Reasons of Crisis and The Moment of Truth

The Politics of Truth and Reconciliation in South Africa

Recent history has exposed several appeals to significances of truth, justice or reconciliation, something that has been confronted by embattled politicians.... To see all these through, South Africa as a nation established truth and Reconciliation Commission (TRC) to handle infamous crimes experienced in the past wicked regime.... As Wilson (16) rightfully observes, truth commission ultimately has a symbolic meaning in that it is incapable of prosecuting any individual....
5 Pages (1250 words) Essay

The Various Images of Birds in the Novel the Awakening

Like the parrot, Edna is unable to express the psychological and emotional truth in herself which would only manifest whenever she confers with Mademoiselle Reisz during special instrumental moments.... Birds, as may be perceived via the turn of the narrative, serves as a collective embodiment of a situation in conflict and personal crisis which the awakening process in Edna's life eventually seeks to resolve.... hellip; Since the issue of woman's independence is central to the main theme of “The Awakening”, Chopin could have necessitated to incorporate birds in the figurative attempt of illustrating how Edna copes with her dull mundane living set in the Creole society of the 19th-century New Orleans and Southern Louisiana....
2 Pages (500 words) Essay

Where Are All the Jobs

What do the statistics truly reveal about the current unemployment crisis and what has the current administration done to improve or prevent it?... The unfortunate problem with this system is that it is not providing the overall data all together; if it did then the United States at this moment is closer to 25 percent, “…the same as during the Great Depression.... They do not include, previously, stay at home mothers or fathers that have, due to the economic crisis, found it necessary to find work but are unable to do so....
4 Pages (1000 words) Research Paper

The Decision-Making of the Judge Advocates General

The paper "The Decision-Making of the Judge Advocates General" discusses the law-governed system.... On the part of the informant, self-interest plays a great role.... According to the law, the informant has all the protection.... His identity is not to be revealed.... hellip; The reason may suggest that such offers should be given to attract people who are knowledgeable about terrorists to come forward....
8 Pages (2000 words) Essay

Womens Challenges during the Holocaust

They experienced all kind of torture in camps, which became her foundational home for her struggles and efforts to survive.... She was barely eleven years of age during the time of her life she was… Kluger's story and life in concentration camps has become one of the most unforgettable accounts of the Holocaust....
6 Pages (1500 words) Essay

The Laramie Project Play by Kaufman

In the paper “The Laramie Project Play by Kaufman” the author analyzes a play that depicts the October 1998 demise of Matthew Shepard, a college student in University of Wyoming, Laramie who was viciously murdered due to his openly gay sexual identity.... hellip; In this paper, the themes of “hate the sin, but love the sinner” and “live and let live” will be explored by examining the history and meaning with the current debate concerning the lifestyle of gay individuals in the US....
6 Pages (1500 words) Essay

The Laramie Project Play

This coursework "The Laramie Project Play" describes the main themes of this play, story of the main character's life, his preference in love, violent crime and he as a symbol of violence experienced by bisexuals, lesbians, transgender, and gay people.... hellip; He was later discovered comatose the following morning by a cyclist who at first confused him with a scarecrow....
6 Pages (1500 words) Coursework

The Moment of the Truth in the USA

The author of this essay "the moment of the Truth in the USA" describes the time that the government faced the alarming truth about the nation's financial progress and its effects on the economy.... nbsp; This paper outlines the truth about the financial crisis.... Therefore, politicians fail to acknowledge the failure is one of the reasons behind the debt crisis.... The other reason as to why the United States is facing a debt crisis includes the fact that the government has increased its spending habits rapidly....
7 Pages (1750 words) Essay
sponsored ads
We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.
Contact Us