National Budget Hero
BALANCING THE NATIONL BUDGET
(Budget Hero)
The simulation used for this project was American Public Media’s Budget Hero. The following nine pieces of the U.S. national budget were available for manipulation: • Defense & Diplomacy
• Schools & Kids
• Science & Nature
• Housing & Living
• Miscellaneous
• Infrastructure
• Health Care
• Social Security
• Taxes The goal was to implement a mix of financial decisions, represented as “cards,” from each of the nine categories, in an effort to reduce the deficit, decrease our national debt, and extend the budget bust as far out into the future as possible. Additionally, three “badges” could be selected to serve as goals, based on various positions, including social, economic, political, …show more content…
environmental, and defense/diplomacy beliefs. They had to be earned by selecting the mix of policies that best met the goals identified in the badges you chose to strive for.
BUDGET STRATEGIES
The strategies I used to balance the budget involved a dynamic range of policies, from simple education investments to Medicare reform and an extreme overhaul of the tax system. In reality, many the cards that were played in this simulation would be rejected by congress. However, in this case, congress doesn’t have a voice and all outside influences are silent, I can enact policies with impunity. Therefore, I used somewhat of a utilitarian approach to a balanced budget while aiming at an efficient government, economic/competitive longevity, and environmental responsibility. The budget breakdown is outlined below.
DEFENSE & DIPLOMACY
(↓$857 BILLION – ↑$15 BILLION)
The U.S. has been actively fighting “the war on terror” for over 11 years and, while significant milestones have been reached, victory, in the context conflicts overseas is ambiguously defined; and, therefore, it is nowhere in sight. Instead of perpetually wasting lives and taxpayer dollars on the problem, we need to focus more on collaborative rather than persuasive diplomacy. Therefore, $807 billion would be from war-related spending over the next 10 years and $50 billion would be saved by ‘’cutting the fat” from redundant and inefficient homeland security spending. Conversely, $15 billion should be spent cleaning up defense nuclear waste sites.
SCHOOLS & KIDS
(↑$59 Billion)
Investing in our future, $58 billion would be spent on making college more affordable and $1 billion would be allocated to fund science and math.
SCIENCE & NATURE
(↓$24 Billion – ↑$41 Billion)
The U.S. could save about $24 billion over the next ten years by cutting crop subsidies to large farms and reducing crop insurance subsidies for all farmers. Furthermore, expenditures on research and development would serve to increase our global competitiveness, promote economic longevity, and conserve our natural resources. In particular, $37 billion would be spent to increase the National Science Foundation (NSF) funds by half and $4 billion to fund research on clean energy.
HOUSING & LIVING
Although it accounts for $387 billion of our national budget, the Housing & Living category was left untouched because socioeconomic responsibility dictates that the policies currently in place are absolutely vital, both for economic development and assisting those in need. However, I do not believe that increasing food stamps by $1 billion is a legitimate solution to our country’s fight against poverty either; too much public assistance actually serves as a disincentive to self-sufficiency.
MISCELLANEOUS
(↓$808 BILLION)
Special interests rarely benefit the economy or society as a whole. Therefore, discretionary spending should be cut by 10 percent, saving U.S. $642 billion over the next ten years, Additionally, just as American citizens have been forced to “tighten their belt,” so should the government. We would save $73 billion, by cutting the federal travel budget in half, $60 billion will be saved by freezing non-military federal and congressional pay through 2015, and $33 B will be saved by cutting special-interest “pork barrel” projects.
INFRASTRUCTURE
(↓$23 BILLION -- ↑$29 BILLION)
Air travel is in increasingly high demand, which, in turn, increases the need for aviation security and the monetary requirement to support it. The solution would come in the form of $21 billion in federal savings, by redirecting aviation security fees to passengers’ per flight ticket costs from $2.50 to $5 each leg, $2 billion by privatizing airport screening. The budget also calls for a $29 billion increase in infrastructure spending – $14 B will be spent on modernizing the air traffic control system, replacing the radar system with the satellite based NextGen system. Consequently, the aviation industry would operate more efficiently and transfer those savings to consumers, which would actually serve to bolster the economy. On the ground, $9 billion would be spent on creating a national infrastructure bank to fund projects based on merit, and $6 B would go to increase Amtrak funding; mass transit benefits the environment as is more cost efficient.
HEALTH CARE
(↓$1,908 BILLION)
This is one of the major areas of contention as well as one of the greatest opportunities for both deficit reduction and improving the overall quality of health care. First, $1,400 billion would be cut from Health Care costs by revamping Medicaid, turning the program into a series of block grants to the states. Giving the states greater autonomy in this regard will allow them to provide health care more efficiently. Then, by increasing drug costs for wealthier seniors, we would ease the burden of poor seniors and cut federal health care costs by $280 billion. Though unpopular, $125 billion in spending will be saved by raising the Medicare eligibility to 67, and $103 billion will be saved by adding a public insurance plan to Obama health reform that will be able to compete with private plans. In regard to ethics in health care, it is often the utilitarian approach that makes the most sense.
SOCIAL SECURITY
(↓$275 BILLION)
Again, in the case of social security, sometimes maximizing benefits for the whole is worth upsetting a few. At the end of the day, this is a beast that must be faced. We begin by slowing the increase of Social Security benefits to account for the chained CPI rather than the standard CPI, which would equate to a cost reduction of $134 billion. Another $134 billion will be cut by increasing Social Security taxes for the wealthy, and $7 billion will be saved by reducing benefits for wealthy seniors.
TAXES
(↑$2,439 BILLION – ↓$25.86 BILLION)
The bulk of our government’s revenue is gained, as it is in reality, through taxation.
$2.439 trillion will come from additional taxes. The most significant card played in this category gained $1.235 trillion alone. Although it is a daunting task and somewhat unpopular, reforming and simplifying the tax code would definitely be a game changer for our current economic position. With this policy, the tax code will be simplified down to three brackets. Rates would drop to between 8 to 12 percent for the lowest wage earners, 14 to 22 percent for the middle bracket, and 23 to 29 percent for the top bracket. Additionally, we will reduce loopholes and tax breaks, eliminate the Alternative Minimum Tax, establish a territorial tax system for corporate taxes, and decrease corporate taxes from 35 to between 23 and 29 percent. Another significant, yet controversial, taxation would be to phase out the home mortgage interest deduction, which would effectively increase federal revenues by approximately $1.043 trillion. Next, $130 billion will be raised by taxing sugary beverages at one cent per ounce. Though some may argue that this additional sales tax would hurt the beverage industry and, by extension, the economy, there is strong evidence to the contrary. In general, the price elasticity of demand for sugar-sweetened beverages (SSB) is inelastic, between -0.8 and -1.0, according to Dr. Tatiana (Tania) Andreyeva, Director of Economic Initiatives at the Rudd Center for Food Policy & Obesity at Yale University (Andreyeva et al., 2009). Therefore, the small price hike is unlikely to bring about any significant movement along the demand curve for SSBs and the tax will, in fact, increase federal revenues, with the added benefit of helping to combat obesity and, to a lesser extent, reduce health care expenditures. This budget also calls for increased taxes on carries. As it stands, private equity and hedge fund managers enjoy only a 15 percent tax rate on carried interest. By
treating carried interest as ordinary income, increasing the rate to 35 percent will generate an additional $21 billion in federal revenue. Finally, by ending tax preferences that allow extractive industries, such as producers of fossil fuels and minerals, to deduct exploration and development costs, the government can save an additional $10 billion. Opposition may argue that this would raise consumer costs, increase foreign dependency, and, in turn, jeopardize our national security. However, proponents to this policy could rebut by pointing out that in an industry that can afford to pay executive salaries up to $12.2 million per year and accounts for roughly 8.5 percent of GDP, $10 billion is pocket change. Additionally, forcing this industry to foot the bill for exploration and development will also reduce instances of fraud, waste, and abuse. Now, thinking forward, some of the revenue from increased taxes will be allocated for the extension of three progressive tax credits, totaling $25.86 billion: $17 for the wind energy production tax credit, $8 billion for the research tax credit, and $0.86 billion for the “new markets” tax credit. The first will assist in closing the gap on energy dependence while simultaneously furthering “The Green Initiative” project’s aim at environment sustainability and clean, renewable energy. The second would bolster U.S. innovation, making our country more globally competitive, and stimulate the economy in the long-run. Finally, the third tax credit is a direct economic stimulus aimed at spurring investment in Community Development Entities (CDEs), such as businesses and real estate in low-income neighborhoods. This will help to combat poverty by creating jobs where they are most needed, which will effectively shrink the lower-class balloon. Ultimately, by enabling self-sufficiency, this tax credit will create a situation where the government can realize a “return on investment,” so to speak, as more people will have the opportunity to pay taxes and be less reliant on the assistance of social welfare programs.
RESULTS
Ultimately, through this complex manipulation of the national budget, nation moved from a projected deficit of -$351 billion, in 2022, to a surplus of $795 billion for the same year. The national debt was reduced by 27.4 percent (6.8 Trillion) over a ten year period, from 58.6 percent of GDP in 2013 ($14.4 Trillion) to 31.2 percent of GDP in 2022, and the budget bust was delayed seven years, from 2033 to 2040. Additionally, the size of the government was reduced from 22.1 percent of GDP in 2013 ($5.4 Trillion) to 18.9 percent of GDP in 2022 ($4.6 Trillion). I also earned two badges: the “Green” badge, for environmentally safe policies, and the “Efficient Government” badge, for significantly reducing government spending while retaining the services it provides.
REFLECTON
I’ve realized that our deficit problem is intricately woven into the fabric of our society, the economy, our global standing, national security and future potential. “Fixing” the deficit problem would, in reality, won’t happen anytime in the near or relatively distant future as long as lawmakers, politicians, and voters retain their polarizing views. Obviously, many other factors play into the welfare of our nation as a whole; however, as evident by our looming health care costs, social security costs, and dilapidated tax system, social concerns drive the economy up or down, depending on the policies in place. On one side of the proverbial coin, social policy can eat away at the bottom line; yet, on the other side of the coin, neglecting social issues will cause the lower-class to swell to the point where it will eventually cause the U.S. to sink.
(Budget Hero)
The simulation used for this project was American Public Media’s Budget Hero. The following nine pieces of the U.S. national budget were available for manipulation: • Defense & Diplomacy
• Schools & Kids
• Science & Nature
• Housing & Living
• Miscellaneous
• Infrastructure
• Health Care
• Social Security
• Taxes The goal was to implement a mix of financial decisions, represented as “cards,” from each of the nine categories, in an effort to reduce the deficit, decrease our national debt, and extend the budget bust as far out into the future as possible. Additionally, three “badges” could be selected to serve as goals, based on various positions, including social, economic, political, …show more content…
environmental, and defense/diplomacy beliefs. They had to be earned by selecting the mix of policies that best met the goals identified in the badges you chose to strive for.
BUDGET STRATEGIES
The strategies I used to balance the budget involved a dynamic range of policies, from simple education investments to Medicare reform and an extreme overhaul of the tax system. In reality, many the cards that were played in this simulation would be rejected by congress. However, in this case, congress doesn’t have a voice and all outside influences are silent, I can enact policies with impunity. Therefore, I used somewhat of a utilitarian approach to a balanced budget while aiming at an efficient government, economic/competitive longevity, and environmental responsibility. The budget breakdown is outlined below.
DEFENSE & DIPLOMACY
(↓$857 BILLION – ↑$15 BILLION)
The U.S. has been actively fighting “the war on terror” for over 11 years and, while significant milestones have been reached, victory, in the context conflicts overseas is ambiguously defined; and, therefore, it is nowhere in sight. Instead of perpetually wasting lives and taxpayer dollars on the problem, we need to focus more on collaborative rather than persuasive diplomacy. Therefore, $807 billion would be from war-related spending over the next 10 years and $50 billion would be saved by ‘’cutting the fat” from redundant and inefficient homeland security spending. Conversely, $15 billion should be spent cleaning up defense nuclear waste sites.
SCHOOLS & KIDS
(↑$59 Billion)
Investing in our future, $58 billion would be spent on making college more affordable and $1 billion would be allocated to fund science and math.
SCIENCE & NATURE
(↓$24 Billion – ↑$41 Billion)
The U.S. could save about $24 billion over the next ten years by cutting crop subsidies to large farms and reducing crop insurance subsidies for all farmers. Furthermore, expenditures on research and development would serve to increase our global competitiveness, promote economic longevity, and conserve our natural resources. In particular, $37 billion would be spent to increase the National Science Foundation (NSF) funds by half and $4 billion to fund research on clean energy.
HOUSING & LIVING
Although it accounts for $387 billion of our national budget, the Housing & Living category was left untouched because socioeconomic responsibility dictates that the policies currently in place are absolutely vital, both for economic development and assisting those in need. However, I do not believe that increasing food stamps by $1 billion is a legitimate solution to our country’s fight against poverty either; too much public assistance actually serves as a disincentive to self-sufficiency.
MISCELLANEOUS
(↓$808 BILLION)
Special interests rarely benefit the economy or society as a whole. Therefore, discretionary spending should be cut by 10 percent, saving U.S. $642 billion over the next ten years, Additionally, just as American citizens have been forced to “tighten their belt,” so should the government. We would save $73 billion, by cutting the federal travel budget in half, $60 billion will be saved by freezing non-military federal and congressional pay through 2015, and $33 B will be saved by cutting special-interest “pork barrel” projects.
INFRASTRUCTURE
(↓$23 BILLION -- ↑$29 BILLION)
Air travel is in increasingly high demand, which, in turn, increases the need for aviation security and the monetary requirement to support it. The solution would come in the form of $21 billion in federal savings, by redirecting aviation security fees to passengers’ per flight ticket costs from $2.50 to $5 each leg, $2 billion by privatizing airport screening. The budget also calls for a $29 billion increase in infrastructure spending – $14 B will be spent on modernizing the air traffic control system, replacing the radar system with the satellite based NextGen system. Consequently, the aviation industry would operate more efficiently and transfer those savings to consumers, which would actually serve to bolster the economy. On the ground, $9 billion would be spent on creating a national infrastructure bank to fund projects based on merit, and $6 B would go to increase Amtrak funding; mass transit benefits the environment as is more cost efficient.
HEALTH CARE
(↓$1,908 BILLION)
This is one of the major areas of contention as well as one of the greatest opportunities for both deficit reduction and improving the overall quality of health care. First, $1,400 billion would be cut from Health Care costs by revamping Medicaid, turning the program into a series of block grants to the states. Giving the states greater autonomy in this regard will allow them to provide health care more efficiently. Then, by increasing drug costs for wealthier seniors, we would ease the burden of poor seniors and cut federal health care costs by $280 billion. Though unpopular, $125 billion in spending will be saved by raising the Medicare eligibility to 67, and $103 billion will be saved by adding a public insurance plan to Obama health reform that will be able to compete with private plans. In regard to ethics in health care, it is often the utilitarian approach that makes the most sense.
SOCIAL SECURITY
(↓$275 BILLION)
Again, in the case of social security, sometimes maximizing benefits for the whole is worth upsetting a few. At the end of the day, this is a beast that must be faced. We begin by slowing the increase of Social Security benefits to account for the chained CPI rather than the standard CPI, which would equate to a cost reduction of $134 billion. Another $134 billion will be cut by increasing Social Security taxes for the wealthy, and $7 billion will be saved by reducing benefits for wealthy seniors.
TAXES
(↑$2,439 BILLION – ↓$25.86 BILLION)
The bulk of our government’s revenue is gained, as it is in reality, through taxation.
$2.439 trillion will come from additional taxes. The most significant card played in this category gained $1.235 trillion alone. Although it is a daunting task and somewhat unpopular, reforming and simplifying the tax code would definitely be a game changer for our current economic position. With this policy, the tax code will be simplified down to three brackets. Rates would drop to between 8 to 12 percent for the lowest wage earners, 14 to 22 percent for the middle bracket, and 23 to 29 percent for the top bracket. Additionally, we will reduce loopholes and tax breaks, eliminate the Alternative Minimum Tax, establish a territorial tax system for corporate taxes, and decrease corporate taxes from 35 to between 23 and 29 percent. Another significant, yet controversial, taxation would be to phase out the home mortgage interest deduction, which would effectively increase federal revenues by approximately $1.043 trillion. Next, $130 billion will be raised by taxing sugary beverages at one cent per ounce. Though some may argue that this additional sales tax would hurt the beverage industry and, by extension, the economy, there is strong evidence to the contrary. In general, the price elasticity of demand for sugar-sweetened beverages (SSB) is inelastic, between -0.8 and -1.0, according to Dr. Tatiana (Tania) Andreyeva, Director of Economic Initiatives at the Rudd Center for Food Policy & Obesity at Yale University (Andreyeva et al., 2009). Therefore, the small price hike is unlikely to bring about any significant movement along the demand curve for SSBs and the tax will, in fact, increase federal revenues, with the added benefit of helping to combat obesity and, to a lesser extent, reduce health care expenditures. This budget also calls for increased taxes on carries. As it stands, private equity and hedge fund managers enjoy only a 15 percent tax rate on carried interest. By
treating carried interest as ordinary income, increasing the rate to 35 percent will generate an additional $21 billion in federal revenue. Finally, by ending tax preferences that allow extractive industries, such as producers of fossil fuels and minerals, to deduct exploration and development costs, the government can save an additional $10 billion. Opposition may argue that this would raise consumer costs, increase foreign dependency, and, in turn, jeopardize our national security. However, proponents to this policy could rebut by pointing out that in an industry that can afford to pay executive salaries up to $12.2 million per year and accounts for roughly 8.5 percent of GDP, $10 billion is pocket change. Additionally, forcing this industry to foot the bill for exploration and development will also reduce instances of fraud, waste, and abuse. Now, thinking forward, some of the revenue from increased taxes will be allocated for the extension of three progressive tax credits, totaling $25.86 billion: $17 for the wind energy production tax credit, $8 billion for the research tax credit, and $0.86 billion for the “new markets” tax credit. The first will assist in closing the gap on energy dependence while simultaneously furthering “The Green Initiative” project’s aim at environment sustainability and clean, renewable energy. The second would bolster U.S. innovation, making our country more globally competitive, and stimulate the economy in the long-run. Finally, the third tax credit is a direct economic stimulus aimed at spurring investment in Community Development Entities (CDEs), such as businesses and real estate in low-income neighborhoods. This will help to combat poverty by creating jobs where they are most needed, which will effectively shrink the lower-class balloon. Ultimately, by enabling self-sufficiency, this tax credit will create a situation where the government can realize a “return on investment,” so to speak, as more people will have the opportunity to pay taxes and be less reliant on the assistance of social welfare programs.
RESULTS
Ultimately, through this complex manipulation of the national budget, nation moved from a projected deficit of -$351 billion, in 2022, to a surplus of $795 billion for the same year. The national debt was reduced by 27.4 percent (6.8 Trillion) over a ten year period, from 58.6 percent of GDP in 2013 ($14.4 Trillion) to 31.2 percent of GDP in 2022, and the budget bust was delayed seven years, from 2033 to 2040. Additionally, the size of the government was reduced from 22.1 percent of GDP in 2013 ($5.4 Trillion) to 18.9 percent of GDP in 2022 ($4.6 Trillion). I also earned two badges: the “Green” badge, for environmentally safe policies, and the “Efficient Government” badge, for significantly reducing government spending while retaining the services it provides.
REFLECTON
I’ve realized that our deficit problem is intricately woven into the fabric of our society, the economy, our global standing, national security and future potential. “Fixing” the deficit problem would, in reality, won’t happen anytime in the near or relatively distant future as long as lawmakers, politicians, and voters retain their polarizing views. Obviously, many other factors play into the welfare of our nation as a whole; however, as evident by our looming health care costs, social security costs, and dilapidated tax system, social concerns drive the economy up or down, depending on the policies in place. On one side of the proverbial coin, social policy can eat away at the bottom line; yet, on the other side of the coin, neglecting social issues will cause the lower-class to swell to the point where it will eventually cause the U.S. to sink.