Deficits, Surpluses, and the National Debt Essay Example
Deficits, Surpluses, and the National Debt Essay Example

Deficits, Surpluses, and the National Debt Essay Example

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  • Pages: 1 (211 words)
  • Published: January 17, 2018
  • Type: Tests
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The topic of surpluses and the national debt is multifaceted. Firstly, predicting the deficit relies on various factors such as the reporting of expenditures and changes in the economy. Considering that deficits add to the debt, the only way to lower the federal debt is by generating a surplus. Economists often overlook trust fund balances since they represent money owed by the government to itself. At present, foreigners owe about 35 percent of public debt. Additionally, the impact of national debt can decrease individuals' purchasing power and reduce economic incentives if taxpayers deem government spending careless. Heavy government borrowing may also lead to crowding out private borrowers

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from the market as interest rates rise. Finally, national debt and tax structure can influence income distribution.

The government's collection of taxes from high-income individuals and the subsequent allocation of such revenue to assist the poor is an act of income redistribution. This concept also holds true in reverse. In terms of reducing deficits and the debt, the 1990 Budget Enforcement Act featured a pay-as-you-go provision that played a significant role in accounting for the 1998 budget surplus and resulted in the individual income tax becoming more progressive. When considering reducing spending, entitlements are classified as mandatory spending, although Congress holds the power to revise them.

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