Economics

1. Ignorance of basic economics
As postulated by Blinder (2007), these policies are characterized by ignorance of basic economics. The call for licenses to pollute seem to be a solution to industries and a fewer regulation to the same. But critically looking at such an issue, it not far from suggesting the society should buy cleaner air and water.

2.  Strict adherence to ideology
Blinder argues that ideologies strict adherence is not the panacea to American problems. Today democrats will support the market based approach to the environmental policy, in the next election campaign liberalists will be supporting the same while the democrats will be opposing.

Special interest
To a politician any policy which benefits the population that offer political support to him or her will be welcomed with both hands, the cost benefit analysis is not part of political game. Ohio will seek for protection of the steel industries while Michigan will seek for automobiles without considering the harms on other states which may include high prices and retaliation from other countries.

(B) Guideposts of good economic policy principles of efficiency  equity
More goods are better than less (efficiency principle), more equality is better than less. A policy should be measured through this scale. Economic subject should not just be taught in colleges but also in high and middle schools

(C). Achieving more efficient, equitable public policy
1. Accounting for the politics of policy making
Knowledge and pragmatism are the solution to ignorance, interests groups and ideology.

Economic calculus simple, direct,  politically naive

Economists approach of issues is different from that of politicians. The cost of any policy will be compared with the benefits attached by any economists. To politicians what pleases the voters is the best policy

Presidential leadership  national interests                  
There is a need to make economic knowledge accessible to the politicians. Statesmanship and a broader national interest should guide the politicians. Leadership is included in policy making and any adherence to economic policies can spread to the whole country.

A. budget deficitssurpluses

1. Definitions
A budget deficit is the excess of total outlays as compared to receipts in fiscal year.  On the other hand when the total receipts in a fiscal year are more than the total outlay then this is a budget surplus.

2. Historical record
Thomas (2010 p2) assert that, US budget deficit have been a common occurrence as opposed to the budget surplus common. During 1940s to 1970s these deficits have not been large with those of 1950s and 1960s and 1970s averaging to 3, 6 and 37 billions respectively. 1980s and 1990s deficits were worse as compared to previous decades. From 1998-2001 budget surpluses were experienced due to rapid growth. After this period deficits have been occurring with the great depression of 2007 creating the worst budget deficit since World War II. The budget deficits of 160, 454.8 and 1417 have been experienced during 2007, 2008 and2009 respectively.

B. common causes of budget deficits
1. War
War involves government outlays to finance military activities. The taxation process is limited by public tolerance and the result will be more outlays compared to receipts. (p 3)2. Recession

Recession is characterized by declining production and rising unemployment. This means tax base will reduce and this shrinks the government receipts. On the other hand the government outlays will increase. Unemployment compensations and other government assistances will increase consequently either a budget deficit will be experienced or the existing budget surplus will shrink. (p 4)

3. policy-makers reaction to the state of the economy
Policy makers may react to economic situation by introducing policies that reduces government receipts. Example of this is the 2001 Bush tax cut which reduced personal income tax hoping that household spending will increase.  This reduced the tax revenue and consequently the budget deficit. (p
4) (C). National debt1. Definition
National debt is the aggregate face value of the outstanding Treasury securities at any point in time.

2. Size of the U.S national debt
The national debt at the end of the federal government 2008 fiscal year was 49,986 with 40 owned by government entities with other parties owning 60 ( whose face value was 5,802). The 60 is also referred to as public debt. (p 5) 3. Servicing the debt net interest payments
U.S. government has to pay net interest to the securities holders. In 2008, 10 of the total federal government receipts ( 253 billion) were directed to paying this interest.

(D) Common misperceptions1. Government bankruptcy
Debt-GDP ratio have been reducing showing that the debt payment is possible and government bankruptcy is not somewhere near.  The increasing nation debt have been accompanied by more increased GDP therefore no cause for alarm. (p 7)2. Budget deficits always cause serious inflation

Budget deficits are not necessarily accompanied by serious inflation. Borrowing from the public mop money from the public thus inflation is not likely to occur although this money will be made available to the public through government spending in future.

E. Effects on future generations1. Are future generations unfairly burdened by the national debt
This will depend on what those budget deficits financed.

(A). capital goods financing  budget deficits
Financing buildings, roads, government offices and so on through budget deficits will not be unfair for the future generation since they will also serve the future generation.
 is it necessary to balance the budget

No. The budget deficit that will allow financing of capital goods is a good policy.  Some situation will call for government to increase the outlays. Reduction of taxes will improve the demand side of the economy and foster economic growth. On the other hand this will mean reduction of tax revenue. A budget deficit will work this out. (p 12)

B. anti-recessionary (expansionary) fiscal policy  budget deficits
Expansionary fiscal policies involve increase in government spending. During recession unemployment rates increases. The government taxation policies also seek to reduce the tax so as to counteract recession from demand side and also through offering unemployment compensation. This increase government outlays while reducing the tax revenues and consequently a budget deficit

Inter-generational commitment to macroeconomic stabilization
The American should be committed to avoiding factors war, recession and policies likely to lead to budget deficits. American people should also be ready to pay for what they wish federal government to provide on year to year basis (p 4)  

(d.) foreign-held debt is it a burden to the economysociety
According Alan (2009), foreign debt lead to capital outflow in terms of interests paid to foreigners. It is a burden to the societyeconomy since this interest is taken away from the economy.F. Overall assessment of the effects of budget deficits  the national debt1. The opportunity cost of debt service and large, persistent annualbudget deficits.

Large, persistent annual budget deficits lead to major annual debt-servicing which is accompanied by diminished likelihood of tax cuts, new government spending programs or increased spending for existing programs. This is the opportunity cost (p 10)

2. The impact of budget deficits on interest rates
The deficit financing is accompanied by increased interest rates. Government borrowing shrinks the available money for lending to the investors.  This will make the interest rates to increase given the law of demand and supply.

3. How problematic are U.S budget deficits  the national debt
Allan (2009 p2) asserts that, budget deficits and national debts leads to diversion of capital from productive domestic use since the interests rates will rise. Capital available to the U.S workers will consequently reduce and this may lead to low wages and low living standards. Credit to borrowers will be costly and less available.

Large deficits can also be a disincentive to investors, cause a run on the dollar and increase the interest rates sharply. G. do we need a balanced-budget amendment to the U.S. Constitution1. Macro implications

A balanced- budget not the most suitable for U.S.  The macroeconomic indicators like total employment, GDP will some times call for deficit budget financing so as to correct them. During recession a balanced-budget will have no room for unemployment compensation or reduced taxes. This will affect demand side of the economy consequently low production and low GDP as well as worsening of recession.