HLS 6060 Week 11 Initial: Current Events In Budgeting

USA Federal Debt Rates and Budgeting:
Name:
Institution:
Date of Submission
USA Federal Debt Rates and Budgeting
Constant borrowing by nations to solve deficit problems due to overspending compared to low revenues has resulted to unending debt crises. Such debt crises have been exhibited in nations such as Greece, Italy, Spain, and Portugal among others (Lane, 2012). The debt crisis comes as a result of uncertainty in paying back principal or interests for the money borrowed. Nations can avoid issues of debt crises through living within their own means by ensuring responsible fiscal management. The essay, therefore, presents an analysis of USA Federal Debt Rate as indicated in The Looming Debt Crisis: An International Perspective by the USA Congress Committee in 2016.
An analysis of the USA budget focusing only on the Federal budget reveals that it is unsustainable. This rate is brought about by higher spending on Medicare, Medicaid, and Social Security. Despite the lessons learned during the 2008 financial crisis, the USA government still does not pay attention to respond to the unnecessary spending. Consequently, the federal debt currently stands at 76.6% debt-to-GDP (USA Congress Joint Economic Committee, 2016).
The last rise in Federal debts in the USA happened due to the frequent financial recessions, debts caused by wars and counterterrorism measures. Though such debts especially deficits on war were financed back. At the recession times, the economy of the country slows coupled with fall in income and decline in tax revenues which results in federal spending on government services. However, when the economy recovers, the deficits normally recede (Kousser, McCubbins & Moule, 2008). Conversely, a shift in federal spending is new in the USA especially expenditure in Medicare, Medicaid, and Social Security which have raised the federal budget almost 50% as at the year 2015. Furthermore, it is projected that spending in the three elements will consume about 96% of federal revenue with a debt-to-GDP ratio of 120% as at the year 2035 (Butler, 2016). Therefore, USA is about to face consequences such as low national income and savings, higher interest rates, reduced responses to national security threats and domestic issues as well as a fiscal crisis (Taylor et al., 2012).
In conclusion, it is true that federal debt is increasing at an abnormal rate due to unnecessary spending. Conversely, such cases can easily be solved through implementation of policies that promote the growth of the economy at a higher rate than the debt, implementation of laws that guard spending on programs such as Medicare, Medicaid and Social Security and establishment of good political will.
Ref...