Answered

Welcome to Westonci.ca, the place where your questions are answered by a community of knowledgeable contributors. Get immediate and reliable solutions to your questions from a knowledgeable community of professionals on our platform. Experience the convenience of finding accurate answers to your questions from knowledgeable experts on our platform.

The president has just signed a new budget that drastically cuts taxes without decreasing government spending. When asked how he plans to address the dramatic increase in deficits that will occur due to the tax cuts, the president responds, "We’re going to see some amazing economic growth because of this new policy, so much growth that we’re going to grow our way out of any short-term increases to government debt." If this extra economic growth doesn’t materialize, what are some of the risks to the U.S. economy? Interest payments on the federal debt will consume a larger portion of the federal budget, potentially displacing other government priorities. It places an unsupportable burden on future generations. Higher government debt may make future borrowing more difficult. It gives foreign creditors substantial control over U.S. economic policy.

Sagot :

Parrain

Answer:

  • Interest payments on the federal debt will consume a larger portion of the federal budget, potentially displacing other government priorities.
  • Higher government debt may make future borrowing more difficult.

Explanation:

If the government spending is not financed by increased government revenue from economic growth, the government will have to borrow money to fund the budget.

Should they do this, they will have to pay more interest payments on the debt which will therefore increase the portion of interest payments in the budget. This means that less areas will be focused on as the government tries to pay the debt.

Borrowing in future will also become very difficult because creditors generally do not like lending money to people who are already in debt. They will even increase the rate offered for such loans which means that even more of the federal budget will go towards servicing these loans.

Thank you for your visit. We're dedicated to helping you find the information you need, whenever you need it. We appreciate your time. Please revisit us for more reliable answers to any questions you may have. Westonci.ca is your trusted source for answers. Visit us again to find more information on diverse topics.