Fiscal Policy

Please rrevise my discussion postand add APAand cite any sources!

Hi class,

In the Debt Fixer simulation, I mainly focused on cutting defense spending, which gave me about $1.24 trillion in savings. Even with that, the debt to GDP ratio still went up over time (around 119% by 2036 and 140% by 2050). That showed me that cutting just one area isnt enough to really fix the debt problem long term. It takes a mix of spending cuts and revenue changes to make a real impact. I do think a high national debt can be a problem for future growth because a bigger share of the budget goes to interest instead of things like infrastructure, education, and other investments that help the economy grow. Ideally, keeping debt closer to or below 100% of GDP seems more sustainable. The simulation also made it clear that under current policies, the debt keeps rising, which isnt great for long-term stability. The crowding out effect is when government borrowing pushes up interest rates and makes it harder for businesses to borrow and invest. When the government takes up more of the available funds, private investment can slow down, which hurts long run economic growth. Thats why large, ongoing deficits can be a negative for the economy over time.

Reference

Mankiw, N.G. (2024). Principles of Economics (10th ed.). Cengage Learning.

• (465.65 KB)

Ryan Young

2 hours ago

Hi Tara,

I am trying to get my responses in early for students this week as I would like to see some changes made prior to the week ending and you can fix what seems to be an issue with your post this week.

This week, you should have a minimum of two full APA citations, as you will need to use the simulation for the ideal Debt to GDP ratio and provide some support for where you found the definition of Crowding Out. Are you able to add these items?

One of the other key parts of the learning this week is looking at relationships with other important economic factors. What are the drawbacks of high debt? What impacts does it cause to other areas? What are those areas? Aside from cutting spending, what is the other choice to relieve high debt?

I look forward to seeing these changes this week and hearing back.

Professor Ryan

Fiscal policies are used by the government to stabilize the economy. During the 2020 emergency caused by the coronavirus pandemic, the U.S. government approved stimulus spending. According to the U.S. Department of Treasury, the federal government spent 91% more than it collected in revenue, creating a $3.1 trillion deficit. The federal debt grew from $26.9 trillion in 2020 to $34.59 trillion in March of 2024.

For this discussion, first play the simulation (from the Committee for a Responsible Federal Budget), in which you make fiscal policy decisions in an attempt to reduce the U.S. debt. You can play the simulation as many times as you like.

In your initial post, include the image (screenshot) of your simulation report in your response. (See the for guidance.) Then, address the following questions:

• Share your experience in the simulation. What strategies did you pursue? Were you successful in reducing the debt?
• In your opinion, is a high national debt a problem for future economic growth? What is the ideal debt-to-GDP ratio? Research academic sources or refer to the information available through the simulation to support your opinion.
• Government spending increases national debt and can cause a crowding-out effect. Explain what the crowding-out effect is and why it’s considered a negative effect of increased government spending. Use information from the textbook to support your analysis.

In your responses, comment on at least two posts from your peers by comparing and contrasting your experiences and opinions. Share current news articles or references from the textbook that support your decisions in the simulation and your claims related to the national debt.