TO: U.S. Senator Amber Bishus (I – Kansas)
SUBJECT: Budget Priorities in Stabilizing the U.S National Debt
With the long-term debt rising to unprecedented levels, and with the public debt projected to grow to about 100% of the economy, different budget strategies need to be employed in the reduction of the US federal debt levels by 60% of the Gross Domestic Product. Three top priorities will be investing in education, cutting taxes for everyone and starting more federal programs.
Cutting Taxes for Everyone
The tax code contains large amounts of spending that is designed to disproportionately benefit upper-income earners and narrow the tax base. Reducing spending in the tax code will raise more revenue at lower rates while making the tax system more progressive. Drastic reforms are recommended for both corporate and individual taxes, to lower the rates and broaden the base. The result would be a simpler, fairer, pro-growth tax system that would translate to more revenue. A drastic revamping of the current code would have many opponents but it may be easier to bring about than increasing the tax rates. Increasing taxes would have many losers, without the potential of benefiting the economy.
It is a common conviction that a reduction in marginal tax rate would spur economic growth, with lower tax rates leaving people with more after-tax income. The extra income could be used to buy more goods, pushing up demand. More savings and investment will result from reduced taxes which will mean an increase in the productive capacity and the productivity of the economy.
Investing in Education
Although the country is not able to quickly grow out of the nation’s fiscal problems, higher levels of economic growth will make it easier by increasing the revenues. It would therefore be best to protect or increase spending in areas such as education and public investment. These are areas that yield the highest economic returns. Countries put great importance in developing systems in education that can produce fruitful workers, who are able to progressively contribute to the growth of the economy.
Education affects the economic growth both indirectly and directly. It is a key component of human capital, therefore directly affects economic growth. Education also affects the economic growth indirectly as it influences other factors of production. Investing in education will therefore lead to general growth in the economy, which translates to laying strategies for reduced debt levels. An educated economy will build industries, businesses and engage the country in quality programs. The quality of education is also a large contributing factor in economic growth. Technologies keep on changing and only better education and training can help harness it to the right areas.
Starting More Federal Programs
As the problem of income inequality continues to grow at an alarming rate, many segments of the population have not had the same economic growth over the past generations. The most vulnerable people in the economy need to be protected by putting up programs that act as a safety net. Federal programs ensure that the much needed assistance is received by areas and people who require it most, while monitoring and accounting for responsible use of allocated funds.
Federal programs are created for specific purposes which include building bridges, providing medicine or food to the poor, giving housing solutions, or giving violence victims counseling. All this activities if well managed can spur growth in the economy. Building bridges will open up local business and create employment opportunities for locals. This translates to increased revenues in terms of taxes and reduced expenditure in food stamps and unemployment benefits payouts.