Suppose governmental expenses are rising rapidly. Which strategy could the federal government use to solve this situation?

Question

a. Delay payments for the interest on the national debt and increase tax rates for payroll and corporate income taxes to raise funds for Medicare and Medicaid.
b. Increase payouts for entitlements and decrease income and payroll taxes so that consumers are provided with more money to pay for increased medical costs.
c. Make cuts to defense and education spending, and then increase tax rates to reduce the effect of increasing expenses in the federal government.
d. Increase corporate and individual income tax rates to raise revenue, and then eliminate payments to state and local governments to cut other costs in the federal government.

Answer 1

The best strategy among the options provided to address rapidly rising governmental expenses is:

c. Make cuts to defense and education spending, and then increase tax rates to reduce the effect of increasing expenses in the federal government.

This option suggests a combination of reducing expenditures in areas that might be deemed less critical (like defense and education) while also looking to increase revenue through tax rate adjustments. This could potentially help to balance the budget and address the rising governmental expenses more comprehensively than the other options, which either involve delayed payments, increasing overall spending, or might lead to reduced services in important areas without addressing the revenue side effectively.