The increasing government debt is an issue for the US economy and policy makers in Washington have different views on how to deal with this problem.Please seethis chart(Links to an external site.)for...

The increasing government debt is an issue for the US economy and policy makers in Washington have different views on how to deal with this problem.Please seethis chart(Links to an external site.)for the change in federal debt in the last 50 years.

The following charts show total federal spending and tax revenues respectively (Please seethis link(Links to an external site.)
(Links to an external site.)for 2019 numbers). Notice that more than half of the government spending goes to Social Security and Medicare, which are the mandatory components of the federal budget. Medicare and Social Security spending is expected to increase due to the increased cost of Medicare and aging population in the future and take up more of the total budget.

Budget deficit is defined as the difference between government spending and tax revenues. As President Clinton once stated, dealing with the budget deficit is simple "arithmetic". We need to cut government spending and increase tax revenues to lower the deficit.

1. If you are one of the policy makers determined to control the federal budget, which federal spending item(s) would you cut?


2. How would you change the tax policy to increase the tax revenue? Would you increase the tax rate or decrease it to increase revenue (review the Laffer curve and comment on the relationship between the tax rate and and tax revenue)? Who should have the burden of tax?
   We have a new tax law that is effective as of 2018. Please also comment on if the current tax law can reduce the budget deficit and help reduce the increase in national debt. Below are two short videos on the new tax law. The first one is for the new tax plan (Arthur Laffer) and the second one is against the new tax law. Please feel free to use other sources and cite your references.
   
   Tax cuts will spark growth and employment (Laffer)(Links to an external site.)
   
   
   Six things we'll regret about Trump tax cuts
   


3. What is the impact of Covid-19 on the budget deficit and national debt? Should we be worried about it?dW (Links to an external site.)
   

Please also see the links in this week's additional readings.