Factors to Consider for Budget Planning

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26th May 2020 Business Assignment Reference this

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Budget Simulation

This essay will give an example of a simulated budget that attempts to make the “right” decisions on what policies or programs need to be enhanced, cut or eliminated. The online game, “Fiscal Ship”, created by the Hutchins Center on Fiscal & Monetary Policy at Brookings, will allow us to examine how the choices I make will enable me to create a balanced budget. Three topics or goals are chosen, the goals I made are, protect the elderly, shrink government and reduce inequality. Discussion around why these goals were chosen as well as an examination of top revenue producers will be included. Programs that were cut or eliminated will be provided and interest groups that might be proponents or opposers of some of my choices will be examined as well.

The first goal I chose is to protect the elderly. This topic was chosen simply because in many cases the elderly are in need more than ever, as they are unable to work and may have ailing health. Giving them the assistance needed as a nation should be a priority. In an effort to reach the goal of protecting our aged some of the policies that were chosen are as follows, boost Social Security benefits for the very old, use income tax to fund Social Security, increase social security payroll tax and increase low wage workers Social Security. When we increase the benefits of our Social Security programs we are giving aid to the elderly and hopefully allowing them better health, comfort and peace in their later years, thus protecting them.

The next goal, to shrink government was benefited by some of the following policies, slow increase in government pay, reduce federal employment through attrition, build fewer submarines, and cut infrastructure spending. The choice to shrink government was based on the idea that quite possibly we have enlarged to many programs, we just have accepted this as the norm over time. Upon reflection of the status of our government now it could be viewed as excessive, spending exorbitant amounts of taxpayer dollars on what some may claim to be unnecessary.

The final goal is, reducing inequality, this provided the following policy choices, expand earned income tax credit, convert mortgage interest deduction to credit, raise the corporate tax rate to 25%, and impose a wealth tax, to name a few. This topic choice in my opinion is of great concern, if we want to look at what our nation should stand for, freedom and liberty for all, this needs to be at the forefront of policy making. Reducing inequality will be a struggle, the gap between the “haves” and the “have nots” can be vast so what can we do? A program that I will discuss in this essay is to impose a wealth tax to help reduce inequality.

Top revenue enhancers enabled the goal of reducing the national debt 1.3% by the year 2044, this being one of the ways to “win” the online game, the “Fiscal Ship”. Two of the top producers of revenue are, to impose a wealth tax, and cut infrastructure spending by the government. Also within this simulated budget plan it does not allow for all policies as they stand now to stay in effect, they could be reduced or modified with spending cuts. Some of the policies that were cut or reduced are, to eliminate federal aid to remote airports, eliminate funding for Amtrak, cut funding for infrastructure, and cut the National Science Foundation funding.

To create a discussion around imposing a wealth tax to increase revenue and possibly reduce inequality we look at a recent proposal by some of our wealthiest top one percent. The article from the Washington Post, written by Hamza Shaban, with the title, “Tax us more”: Group of Ultra Rich Urge 2020 Presidential Candidates for a Wealth Tax”, discusses some wealthy individuals who are proponents of a wealth tax wrote a letter to the 2020 Presidential candidates. They mention in a nutshell that in their opinion it is the right thing to do. Some of the wealthy individuals that wrote this letter include Abigail Disney, Chris Hughes, George Soros, and Regan Pritzker. The tax could help address issues that we as a nation face today, to name one better healthcare for all. This article also states that a recent poll from Politico-Morning Consult has revealed that many Americans are having this same opinion to tax the wealthy. In this poll it showed, 60% supported a wealth tax while 20% opposed and 10% were unsure. Gregory Krieg, MJ Lee and Tami Luhby writers for CNN, discuss the following article, “Elizabeth Warren to pitch new ‘wealth tax’ on richest Americans”. This reveals a letter written to Senator Warren from University of California Berkeley economics professors Emmanuel Saez and Gabriel Zucman. The professors are known for their insight into income inequality and taxing the rich. The professors laid out a plan that Senator Warren has adopted which includes a wealth tax. One of the most compelling ideas around supporting this tax is, the inequality we see with income tax, the bottom 99% of Americans are taxed at 7.2% of their wealth, money usually earned through labor. The wealthy, pay taxes on money from their wealth that is taxed at a lower rate. Opposition on this tax may come from individuals that feel if the wealthy are taxed at a higher rate they will not invest more, thus eliminating jobs. On the surface it does seem to be an appealing fix to impose a wealth tax, but some warn it could have devastating economic effects and many feel that the wealthy will find ways to avoid paying for this tax or at least limit the amount they pay.

The second top revenue producer and program that we will look at in this budget simulation is to cut infrastructure spending, thus allowing for increased revenue. This decision will provide interest groups that will find this to be seriously flawed, while others may feel it is warranted. To discuss the differing opinions we first take a look at the article titled, “The Infrastructure Myth”, written for the Hoover Digest, by Paul R. Gregory. In this article there is discussion around Hillary Clinton while a candidate for Presidency, promised to send a bill to congress to increase infrastructure spending by $275 billion. President Donald Trump then as a candidate, stated that he would double what she proposed. When you hear this it is hard not to think that we must indeed have a very serious need to improve our nation’s infrastructure, images of bridges collapsing all over the country come to mind. The American Society of Civil Engineers agrees with the then Presidential candidates, that we need to spend trillions over the next decade to truly make America safe. This could be a biased view when you think of the money that would be made by all of the contracts given to create “bridges to nowhere”. The opposing view is that we are actually spending a lot of money on infrastructure.  The well known Kiel Institute for the World Economy, has created a process to see the infrastructure based on actual facts versus opinions. The problem is not enough money, but the money is not being efficiently spent. Infrastructure spending may account for expansive projects that could possibly produce little to show for the effort and the money spent giving an impression of corruption.

When looking at some opinions of interest groups or organizations that may oppose some of the policies or programs that were eliminated or cut we should discuss, The American Association for the Advancement of Science, a non-profit organization. They most likely would be opposed to cutting the funding for the National Science Foundation. This group has a focus to provide cooperating interests in science, supports education in science and science working towards the betterment of mankind. While their possible claim of concern over cuts could be valid, it is also important to look at what some experts call “frivolous spending”. The National Science Foundation is considered an independent agency, this could provide questions around who is given grant money and did the project being given these funds go through a proper review for it’s merit.  The article written for, Scientific Research, “Should the Government Fund Scientific Research?” by Sylvia Engdahl discusses the very issue of concern around money not being spent wisely. Representative Lamar Smith, chairman of the House Committee on Science, Space and Technology, told Scientific American that, “indeed there has been funding for questionable projects”. An example of this type of spending would be, $700,000 of taxpayer money on a climate change musical, (Lamar Smith, 2016). Lamar Smith in 2015 proposed the, Scientific Research in the National Interest Act. This act would allow for the grant process to be more transparent, thus allowing for               more accountability as to what the National Science Foundation provides funding for. It is important to have oversight on the spending of these funds to allow them to be used as the National Science Foundation has claimed, for the betterment of mankind.

In conclusion, it is clear that when trying to create a budget that would reduce national spending it is not something that has an easy “fix”. When looking at the benefits of eliminating a program or cutting the funding, it often shows a ripple effect, will those effects cause promise for a fiscally sound future, a stronger government and people, or could it do more harm than good. Protecting the aged, reducing government and reducing inequality all were enhanced in my budget simulation. As was discussed in this essay the scales of what is right or fair seem to never be in line due to the many different viewpoints and opinions that will arise.

Works Cited

  • “Elizabeth Warren to pitch new ‘wealth tax’ on richest Americans.” CNN Wire, 24 Jan. 2019. Gale In Context: Opposing Viewpoints, https://link.gale.com/apps/doc/A570926404/OVIC?u=las55353&sid=OVIC&xid=b75d01e0. Accessed 10 Oct. 2019.
  • Smith, Lamar. “Fact check: scientific research in the National Interest Act.” Issues in Science and Technology, vol. 32, no. 2, 2016, p. 15+. Gale In Context: Opposing Viewpoints, https://link.gale.com/apps/doc/A440634768/OVIC?u=las55353&sid=OVIC&xid=b0b467da. Accessed 11 Oct. 2019.
  • Gregory, Paul R. “The infrastructure myth.” Hoover Digest, no. 1, 2017, p. 28+. Gale In Context: Opposing Viewpoints, https://link.gale.com/apps/doc/A509994588/OVIC?u=las55353&sid=OVIC&xid=813afe7c. Accessed 10 Oct. 2019.
  • “Preface to ‘Should the Government Fund Scientific Research?’.” Scientific Research, edited by Sylvia Engdahl, Greenhaven Press, 2015. Opposing Viewpoints. Gale In Context: Opposing Viewpoints, https://link.gale.com/apps/doc/EJ3010948102/OVIC?u=las55353&sid=OVIC&xid=3b56d5bf. Accessed 10 Oct. 2019.

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