The National Debt

During the Great Recession, like any other economic downturns, as unemployment rises, aggregate income
declines causing a major decline in tax collections. On the other hand, with the rise in unemployment, spending
on safety net programs rise. So, to stabilize the national economy, government appears to have only two
options (neither good) either to put in place severe austerity measures (cut spending) or increase borrowing. Of
course, it is very difficult to defend cuts in the federal government programs and especially the programs
geared to sustain the minimum of the standard of living for the “poor.” But increase in borrowing has major
adverse impacts on the national economy.
Write an essay analyzing
· Different theoretical views on national debt,
· Long-run costs of high national debt,
· Costs of eliminating the budget deficit solely through (1) personal tax increases, and/or (2) through spending
cut by decreasing in transfer payments (i.e., Social Security, Medicare and Medicaid) and in discretionary
spending (such as defense and education budgets).

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