THE ACTIVITY
- Read the following scenario.
Over the past many years, there has been ongoing debate raging in Washington, D.C. regarding the U.S. federal budget. As the U.S. deficit increases, some argue that cutting government spending should be a key priority of our lawmakers. Others favor more gradual decreases, such as raising taxes or implementing a proposed freeze on discretionary spending. Either way, as an economic adviser to the President, you have been tasked with presenting a proposal that addresses how to fix a current budget gap of $300 billion dollars in an effort to appease both sides of this debate.
A-Using the budget below, decide what options you will suggest cutting or implementing for your presentation to the president. Remember that these actions must cover a budget gap of $300 billion. When you have reached your target, save your results—you will need to refer back to them to answer your assessment questions. ( Please keep in mind that these changes could seriously affect citizens’ daily lives. Also keep in mind people may be so angered by the changes that they will take action to prevent the president’s reelection, thus putting you out of a job). Please answer all questions (8) related to previous activity …..questions are after the budget below:
| DOMESTIC PROGRAMS AND FOREIGN AID | Cut foreign aid in half | $17 billion |
|---|---|---|
| Eliminate farm subsidies:
Opponents believe subsidies help large businesses at the expense of small farms. Supporters believe subsidies protect American agriculture. |
$14 billion | |
| Cut pay of civilian federal workers by 5 percent | $14 billion | |
| Reduce the federal workforce by 10%:
This would eliminate approximately 200,000 federal jobs. |
$12 billion | |
| Other cuts to the federal government: This includes reduced funds for the Smithsonian and the National Park Service, and closing the Office of Safe and Drug-Free Schools. | $30 billion | |
| Cut aid to states by 5%: This pressure states to cut funding for schools, police, and other services. | $29 billion | |
| MILITARY | Reduce nuclear arsenal and space spending: This would cut the number of nuclear warheads and end the “Star Wars” missile defense program. | $19 billion |
| Reduce military to pre–Iraq War size and further reduce troops in Asia and Europe | $25 billion | |
| Cancel or delay some weapons programs: This would cancel some expensive purchases identified by the Sustainable Defense Task Force as possible cuts. | $19 billion | |
| HEALTHCARE | Enact medical malpractice reform: This option would begin to reduce the chances of large malpractice verdicts, which supporters believe would also check rising medical costs. Opponents say it could reduce doctors’ incentives to avoid errors. | $ 8 billion |
| Increase the Medicare eligibility age to 68 | $ 8 billion | |
| Raise the Social Security retirement age to 68: This would rise from the currently planned 67, encouraging people to work longer. | $ 13 billion | |
| EXISTING TAXES | Return the estate tax to Clinton-era levels: Those passing on an estate worth more than $1 million to their heirs would have portions of those estates taxed. | $ 50 billion |
| End Bush tax cuts for income above $250,000 a year | $ 54 billion | |
| End Bush tax cuts for income below $250,000 a year | $ 172 billion | |
| Payroll tax increase for high earners: Those making over the current ceiling of $106,000 would have to contribute more to Social Security and Medicare. | $ 50 billion | |
| NEW TAXES | Millionaire’s tax on income above $1 million | $ 50 billion |
| National sales tax: This would add a tax of 5 cents on every dollar for most purchases. | $ 41 billion | |
| Carbon tax: This option would tax carbon emissions, which scientists believe contribute to global warming. | $ 40 billion | |
| Bank tax: This would tax banks based on their sizes and the amount of risk they take. | $ 73 billion | |
| Total gap covered by your budget plan | $_________________ |
1-What is your final plan to present to the president? What changes did you decide to implement?
2-Please explain why you choose the options that you did
3-How will your decisions affect the elderly , the poor , the rich and national security if implemented?
4-Was covering the hypothetical budget gap more or less than you expected? Please explain
5-Which of your decisions might be perceived as politically motivated? Why?
6-What are the trades-offs of preserving some programs while protecting others?
7-How do your decisions result in a marginal benefit to society so that they can outweigh the marginal cost to society?
8-Did doing this exercise change your feelings about the budget debate in Washington? If so, how? If not, why not?