Read the AP article “Dems, GOP talk up deficit reduction, but don\'t act (https:

Question

Read the AP article “Dems, GOP talk up deficit reduction, but don't act (https://www.yahoo.com/news/dems-gop-talk-deficit-reduction-dont-act-070757688--finance.html).” by C. Babington (Apr25’13).

What are the two basic ways of shrinking a budget deficit?

Which of your answers above are Republicans vehemently against? What are the potential negative economic effects of implementing this basic policy?

Which of your answers above are Democrats strongly opposed to? What are the potential negative economic effects of implementing this basic policy?

Explanation / Answer

Answer:

9.
A.
Two basic ways of shrinking a budget deficit are:
1.   Increase taxes to generate more revenues
2.   Reduce spending on social security benefits and Medicare programs

B.
Proposal to increases taxes are going to be vehemently opposed by the Republicans. Potential economic effects of implementing this policy are:
1.   The less disposable income to be with an American
2.   Reduced demand that can result in slower growth of the economy
3.   Increase in the economic divide among different sections of the society in the USA

C.
A Proposal to reduce the spending on social security benefits and Medicare programs are going to be vehemently opposed by Democrats.
Potential economic effects of implementing this policy are:
1.   It will have a negative effect upon quality adjusted life years of people
2.   People have to pay more for health care services
3.   Quality of life will deteriorate
4.   It will negative affect the demand for other sectors. Thus, economic growth may be slowed down.

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