Fiscal Policy Federal Debt and Research Proposal

Excerpt from Research Proposal :

Ergo, economic growth through the private sector is not possible without federal deficit. In his own words, "while it is commonly believed that continual budget deficits will bankrupt the nation, in reality, those budget deficits are the only way that our private sector can save and accumulate net financial wealth" (Wray, 2009).

3. The Reformation of Entitlement Programs

The article selected to answer the question relative to the future strategies that should be implemented to reform the entitlement programs is also written by Randall Wray, not for any other reason but for the curiosity of revealing his stand on the topic. This curiosity is raised by the innovative stand he takes relative to federal debt, making it as such intriguing to identify the author's views relative to other issues as well. This second article is entitled Social Security: Truth or Useful Fictions? And is written in a structured manner so that it is easy to follow. Similar to Teaching the Fallacy of Composition: The Federal Budget Deficit, is written with the proper and balanced usage of common and specific language, meaning that it appeals to a wider segment of the population, not just those specialized in economic and financial matters.

Wray commences by placing the entitlement services within the current context and arguing their importance. They must be perceived not as a plan or something to entirely rely upon, but as a "worst comes to worst" solution. Despite the current problems with health care coverage or social services, fact remains that private investment funds do not offer a solution. They merely represent a new scheme in favor of privatization, with the designated aim of increasing the revenues of those who administer the respective funds. Not only that they do not provide a transparent plan for the means by which the money is invested, they also do not offer protection against political changes. Therefore, the first thing not to be done about entitlement programs is the encouragement of privatization.

Then, there is the statement according to which not much can be done relative to social services, as they are pegged to the incomes from taxes. Additionally, since the demand for these types of services is not only irregular, but even increasing throughout the past few years (with the aging of the baby boomers for instance), financial constraints cannot be imposed to ensure a better regulation. In other words, one cannot implement reforms limiting the amounts of money spent on social services, meaning that financial restriction is not a suitable means of resolving the problems of the entitlement programs.

The third possible approach to entitlement services is offered by the prospect of opening personal accounts. Wray's view is that such an approach would be useful for the individual; nevertheless, it would not hold significant relevance to the overall system. In this context of the three reforms that should not be passed, one would wonder as to what are those reforms that should be promulgated. Wray suggests increased attention to the means by which the federal institution allocates the money, including the investments they make and which could not only provide social services and medicare, but also which could multiply to add new money to the state budget.

He also promotes honesty, integrity and transparency. The final recommendation however revolves around the reduction of the tax rates to which the working population is being subjected. This suggestion is based on the belief that high tax rates discourage the population from working, which in turn means less money to the state budget and a reduced ability to offer entitlement programs. "Payroll taxes simply discourage work-which is as perverse as policy can get. We need people to work to provide all the goods and services the elderly need. Abolish the payroll tax, abolish the Trust Fund, abolish actuarial gaps, and let's recognize that Social Security is an intergenerational assurance program" (Wray, 2009)

References:

Wray, L.R., 2009, Teaching the Fallacy of Composition: The Federal Budget Deficit, Economic Perspectives from Kansas City, http://neweconomicperspectives.blogspot.com/2009/08/teaching-fallacy-of-composition-federal.html last accessed on October 21, 2009

Wray, L.R., 2009, Social Security: Truth or Useful Fictions? Economic Perspectives from Kansas, http://neweconomicperspectives.blogspot.com/2009/08/social-security-truth-or-useful.html last accessed on October 21, 2009

Sources Used in Documents:

References:

Wray, L.R., 2009, Teaching the Fallacy of Composition: The Federal Budget Deficit, Economic Perspectives from Kansas City, http://neweconomicperspectives.blogspot.com/2009/08/teaching-fallacy-of-composition-federal.html last accessed on October 21, 2009

Wray, L.R., 2009, Social Security: Truth or Useful Fictions? Economic Perspectives from Kansas, http://neweconomicperspectives.blogspot.com/2009/08/social-security-truth-or-useful.html last accessed on October 21, 2009

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