What are the two ways to decrease the national debt?

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pohnpei397 | College Teacher | (Level 3) Distinguished Educator

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The two ways to decrease the debt are to tax more or to have less government spending.  Of course, a combination of the two could be used as well.  Both of these ways of decreasing the debt have problems associated with them, though.

If we increase taxes, we get the benefit of not having to give up the things that we get through government spending.  The problem is that higher taxes can reduce economic activity.  Thus, higher taxes might actually make us worse off.

If we reduce government spending, we lower the debt without having to raise taxes.  But the problem is that the bulk of government spending goes for programs that people like.  There is very little discretionary spending on domestic programs.  Most of the government's budget goes to entitlements and the military.  Therefore, it is hard to cut spending enough to make a major difference without addressing entitlements, which are very politically sensitive.  In addition, cutting government spending might temporarily hurt the economy because the money government spends now will be removed from the economy.  That will mean that less economic activity might occur.


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