National Budget Simulation Exercise the Term Paper

  • Length: 5 pages
  • Subject: Economics
  • Type: Term Paper
  • Paper: #73149278

Excerpt from Term Paper :

In addition, just over $41 billion was removed from 2001 and 2003 tax cuts. The cuts in military spending will affect a wide variety of citizenry. Specifically, military personnel will be affected with reduced budgets across the board. This will result in a reduced readiness of the military to protect the United States, in the short-term and the long-term. This reduction in spending will also negatively affect civilian contractors and other companies that provide products and services to the military. This will result in lost revenues and decreased profitability for these organizations. A secondary effect of this could result in lost jobs and reduced tax revenues for the city, state and national governments, as well as reduced revenues for other businesses in the community, if these organizations implement worker layoffs.

Social Security cuts will negatively affect the growing population of Baby Boomers and those already receiving Social Security benefits. However, this underfunded program has significant problems that must be addressed directly. Simply allowing it to continue on the path ti's on is not acceptable. As such, the reductions in the Social Security budget will directly mean a reduction in administration support staff as well as reduced benefits for those currently in the program, in the short-term. Indirectly, there will be short-term effects that affect surrounding businesses.

Medicare and non-Medicare health spending were both cut by ten percent. This reduction will affect senior citizens currently receiving Medicare benefits, as well as lower income families that receive benefits under the non-Medicare program, such as Medicaid and state children's health insurance programs. Will likely result in long-term higher operating costs for physicians and medical facilities as more services aren't reimbursed by patients who can't afford to pay for their medical services. This will result in higher prices for medical services, to make up for this lost profitability. This will affect both insurance companies and patients directly. Consumers will not only directly experience higher medical costs, but also higher insurance rates.

Lastly, a large part of the balancing of the budget was accomplished through a reduction in the 2001 and 2003 tax cuts. The largest portion of this came from a 20% reduction in the tax cuts that affected the top one percent of taxpayers, who made more than $375,000 annually. However, the richest Americans aren't the only ones who'll have to pay a higher tax rate to overcome the deficit. The remainder of the taxpayers will have a reduction in their 2001 and 2003 tax cuts by ten percent.

Lessons Learned:

The lessons learned from the National Budget Simulation Exercise include how some of the most socially critical programs are those that have the highest amount of spending. Therefore, keeping these programs completely intact would result in having to severely cut funding in most of the other smaller programs, to achieve the same budget reduction. The exercise highlighted how lopsided the federal budget is, with $1,500 billion of a $2,325 billion budget being spent in only four categories. For this reason, although these programs are important, they must be reduced to balance the budget.

A second lesson learned from this exercise includes how much taxes the top one percent of the taxpayers pay. An additional ten percent reduction in the 2001 and 2003 tax breaks resulted in more than $10 billion in increased tax revenue for the federal government. This leads to the conclusion that these tax break policies gave significant tax breaks to this uppermost tax bracket.

Conclusion:

In the end, the budgetary cuts in the largest programs were the most effective means of balancing the budget. Budget cuts in any program will negatively affect those receiving benefits from the programs, but by targeting the larger programs, a lesser percent of funding could be reduced making the reduction less drastic then if it was a larger percentage of a smaller program. However, the one area where this simulation was lacking is the related effects of the budgetary changes.

As an example, a reduction in spending in some areas could negatively affect the economy. Reduced government spending results in reduced payroll for employees of those programs, which reduces those employees' spending, which negatively affects revenues and profitability for companies that normally provide products and services for these employees,

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