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The lingering recession calls for an expansionary fiscal policy that advocates increases in government expenditures and/or decreases in taxes. As we know a consequence of increased government spending can decrease private expenditures and cause crowding out (Arnold, 2016). So as Erskine Bowles acknowledged, “[w]e cannot simply grow our way out of it” (Bowles, 2012).If the percentage increase in the tax base is greater than the percentage reduction in the tax rate, then tax revenues will increase (Arnold, 2016). To accomplish that, I would propose the following:To add revenue, we must raise long-term capital gains, add a capital gain tax on assets transferred at death (this is currently excluded from taxable income), reduce the amount that can be deducted from charitable contributions and mortgage interest payments (Congressional Budget Office, 2013). These measures would allow for the government to offer a reduction in the tax rates that could attract investment and add new revenue.In order to reduce spending, health care expenditures must be reined in as their growth rate is much higher than GDP. Income security would also need to be reduced. One way to achieve this reduction in spending would be by completely rehauling HUD policies and procedures and reducing government employee benefits. While these ideas will definitely not be popular, it all comes down to the sacrifices we are willing to make.Lastly in 2015, the deficit actually fell to $439 Billions (Budget & Projections, 2015).ReferencesArnold, R. A. (2016). Economics. Australia: Cengage LearningBowles, E. (2012, March). The danger of Doing Nothing. Retrieved from Harvard Business Review: https://hbr.org/2012/03/the-danger-of-doing-nothingBudget & Projections. (2015, October 15). FY 2015 deficit falls to $439 Billion, but debt continues to rise. Retrieved from Committee for a responsible federal budget: http://www.crfb.org/papers/fy-2015-deficit-falls-439-billion-debt-continues-riseCongressional Budget Office. (2013, May). The distribution of major tax expenditures in the indiviudal income tax systems. Retrieved from Congress of the United States: http://cbo.gov/sites/default/files/cbofiles/attachments/43768_DistributionTaxExpenditures.pdf
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