Question

Suppose governmental expenses are rising rapidly. Which strategy could the federal government use to solve this situation?(1 point) Responses Increase payouts for entitlements and decrease income and payroll taxes so that consumers are provided with more money to pay for increased medical costs. Increase payouts for entitlements and decrease income and payroll taxes so that consumers are provided with more money to pay for increased medical costs. Make cuts to defense and education spending, and then increase tax rates to reduce the effect of increasing expenses in the federal government. Make cuts to defense and education spending, and then increase tax rates to reduce the effect of increasing expenses in the federal government. 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. 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. 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. 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

To address rapidly rising governmental expenses, a viable strategy could be to make cuts to defense and education spending, and then increase tax rates to reduce the effect of increasing expenses in the federal government. This approach aims to reduce expenditures in certain areas while simultaneously increasing revenue through higher taxes, which can help to stabilize the budget and manage rising costs.

The other options may not effectively balance the budget or might exacerbate the situation. For example, increasing payouts for entitlements without addressing funding sources could worsen the fiscal challenge, while delaying payments on the national debt could lead to more significant long-term issues. Similarly, eliminating payments to state and local governments may lead to negative consequences for essential services and infrastructure at those levels.

Thus, strategically cutting spending while raising revenue is often considered a practical approach in fiscal management.