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Fiscal Policy Problems
Uncontrollable entitlement programs,
coupled with Congress’ inability to modify them, remain key impediments
to Fiscal reforms that are so desperately needed. The projected increase
in the federal deficit can not solely be controlled by limiting
discretionary spending. In fact, discretionary spending, or that
spending which has not been previously promised through programs like
Social Security, Medicare and Medicaid or spoken for by defensive
spending, makes up only about 29% of the budget.
The rest of the national budget is occupied by
defense spending, entitlement programs and the ever increasing interest
on the national debt. While defense spending, which remains a
substantially smaller portion of the overall budget, is projected to
decrease in future years, entitlement spending is expected to skyrocket.
Thus, America’s unsustainable Social Security, Medicare, and Medicaid
programs are the true culprits behind its looming fiscal crisis.
Unfortunately, all solutions to this
problem involve either increasing taxes or reforming entitlement
spending. Such reforms would entail changing the way entitlement
programs are distributed by reducing the benefits to many if not all of
its recipients. Since virtually no voter is receptive to politicians
who campaign on a platform of higher taxes and less entitlement
spending, the problem is liable to get much worse before it gets better.
Social Security and Government Health Care are collectively the
dangerous third rail of American politics – grab hold and die.
The current political polarization in
Congress only exacerbates the already dim situation. Politicians on both
sides of the aisle are less willing to initiate reforms because of the
harsh criticism that they know awaits them from the other side. Most
politicians today are increasingly likely to oppose legislation purely
based on its origin in another political wing and not because such
legislation lacks value. Such partisan cleavages stand in the way of
future economic reforms.
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