Week 3 Discussion 1 & 2 Response

BUS626 Week 3 - Discussion Forum 2

Responses

Guided Response: In your response, take the opposing view of the original post regarding national debt. Respond to at least two of your fellow students’ and to your instructor’s posts in a substantive manner and provide information or concepts that they may not have considered. Each response should have a minimum of 100 words. Support your opposing view by using information from the week’s readings. You are encouraged to post your required replies earlier in the week to promote more meaningful and interactive discourse in this discussion forum. 

Below are two classmates with discussion that need response. They are Lisa Schreiner and Jason Stack

Lisa Schreiner

A deficit is the gap when spending exceeds budget. A surplus is the gap when budget exceeds spending. The debt is an accumulation of deficits less surpluses over time. The large and increasing national debt is definitely an issue we should be concerned about. Persistent increases in debt could lead the US to a failed economy with low credit ratings from Moody’s, and a call on loans we cannot pay. During a recession, the deficit (debt overall) will increase as the US borrows funds to cover the spending gap. During an expansion, the US should decrease spending producing a surplus to lower the overall debt. In recent years, the economy has been running in expansion mode, but yet the government continues to spend, increasing the deficit and debt. This is not a sustainable practice. According to the Committee for a Responsible Federal Budget (2018), “Running large deficits when the economy is already strong means that any boost provided to the economy will be temporary, and may put unnecessary upward pressure on inflation and interest rates. Running permanent deficits means that they will increasingly hurt investment and growth over time. They cannot simply be waited out. Rising deficits are largely driven by the increasing cost of interest and health and retirement programs, which are caused by rising health care prices and an aging population. Yet even with these factors, deficits were on course to decline over the next couple years before Congress enacted fiscally irresponsible tax cuts and spending hikes” (para. 12-13).

John Tamny views the national debt as a give and take, noting we are better off to have the government spending less with some debt than the government spending more and having no debt. John discusses limiting the government’s control on spending and investing into the private sector, generating technological advances and innovation to grow the economy (Tamny, 2020). After reviewing several articles and watching videos in the recommended reading section for the week, I agree, this is an issue and controlling government spending is part of the process. There are four programs consuming a significant portion of government spending: Social Security, Medicare, Medicaid, and ObamaCare. According to PragerU (2014), “to cut spending; specifically, cut the rate of growth of the three legacy programs - Social Security, Medicare and Medicaid. That doesn’t mean spending less money than we already are. It simply means not increasing our spending as fast as we have been” (para. 13). Updates to the retirement age have been implemented over the years to try and close the gap on the costs in these programs, but additional measures must be derived. I believe further scrutiny is necessary on applications submitted to receive benefits, particularly from folks whom have not invested an extensive work history of contributions to the system. The government should not be permitted to borrow funds from these programs funded by the taxpayer for the taxpayer.

 

References

Committee for a Responsible Federal Budget. (2018, December 13). The deficit has never been this high when the economy was this strong. http://www.crfb.org/blogs/deficit-has-never-been-high-when-economy-was-strong (Links to an external site.)

PragerU. (2014, September 29). How to solve America’s spending problem. www.prageru.com/video/how-to-solve-americas-spending-problem/ (Links to an external site.)

Tamny, J. (2020). Ashford University | BUS626 WEEK THREE | DISCUSSION TWO Q&A

Jason Stack

Government Budget Deficits

             I don’t think anyone one of us can disagree that the national debt has been a highly debated topic for economists for many decades. Impending doom and gloom is foretold of the United States, and borrowing above it means to repay. As Tamny (2015) suggests, Niall Ferguson and those alike have predicted for years the downfall of the U.S. economy as a result of its careless borrowing to a seemingly unfathomable debt ceiling (pg. 29). Yet here we stand. The question remains, should we be concerned about the national debt? Gwartney suggests that we shouldn’t be concerned unless the interest rates start rising, which increasingly compounds the repayment cost (Gwartney et al., 2019, pg.12-7). Alternatively, Tamny 2015, suggests that it’s the overall spending of the U.S government regardless if the money is borrowed is collected (pg. 32). The excess spending robs capital from the economy that the free market could have invested back into itself. So, should we be concerned about impending doom or not care at all? Like most things in economics and life, there must be a balance.

            I think the solution is found somewhere in between total lockdown and going on an endless national shopping spree. Even Gwartney et al. (2019) refers to what most of us would consider a financial common sense, “live within your means” (pg. 11-3c). I believe the same should apply to the United States, as well as the individual. Even with the application of John Tamny's logic, stating that the United States is a seemingly riskless loan, there comes the point in time when repayment becomes impossible no matter how great the interest rate of the loans. For example, if my monthly income is 10,000 dollars, but I go out and incur 12,000 dollars of debt per month. Even a zero percent interest rate, it would never be repaid unless I increase my monthly income. Our country faces the same issues with debt to income ratios, so either they raise taxes, reduce spending, or borrow more money to solve the problems. I believe the United States should live within its means, that means we all tighten up the belt on government spending.

Thanks,

Jason Stack

 

References

Gwartney, J. A., Stroup, R. L., Sobel, R. L., & Macpherson, D. A. (2018). Macroeconomics:

            Private and public choice (16th ed.). https://www.cengage.com (Links to an external site.)

 

Tamny, J. (2015). Popular economics: What the Rolling Stones, Downton Abbey, and LeBron

            James can teach you about economics.