How sensitive has this company’s value been to changes in macro-economic variables such as interest rates, currency movements, inflation, and the economy? How sensitive has this company’s operating income been to changes in the same variables?
September 6, 2018
Did the student develop sound plans based on the requirements described during the project phases? Did the student provide clear and easy-to-understand documentation, which may include tables and other presentation elements?
September 6, 2018

Did the policy options have the impacts—either on your fiscal target or governing goals—that you expected?

Saving Our Fiscal Ship

I have created an assignment that puts you in charge of attending to the long-term health and well-being of the United States of America (!!). Utilizing a simulation created for the Brookings Institution called The Fiscal Ship, you will learn about the relationships that exist between federal decision-makers and the myriad policy decisions they make. Given the dire condition of the federal debt and ongoing levels of deficit spending, you are tasked with no less than saving the country by mid-century!

(Spend a few minutes examining the federal debt by clicking on this link:http://www.usdebtclock.org/ (Links to an external site.)Links to an external site.)

Background

The interplay of governing institutions and the making of public policy is at the heart of what we study in Module 2. As we will see, typically what we “know” about politics and policymaking is pretty far removed from the actual practices of politics. Separation of powers with checks and balances produces the executive, legislative, and judicial branches of government; while it does not create coequal branches of government, it does prevent any one branch from dominating the others. These governing institutions are inherently political. They produce policies that allocate relative advantage and disadvantage, meaning that there are winners and losers with every decision government makes. It makes sense, then, that there are forces pressuring these institutions to maximize advantages or to minimize disadvantages.

Americans are raised with a naive kind of assumption that “government should do what’s best for the people,” a notion that ignores the role of political parties, interest groups, powerful stakeholders, and ideological preferences in the policymaking processes. It is true that the American political system works more effectively when bipartisan compromises can be reached. This is so because a sizable portion of the governed feels better represented when such compromises are made. However, today’s political environment offers few opportunities for bipartisan responses to important public policy priorities. The political divide in Washington, DC, is wider today than at any other time in the modern era.

For decision makers, the tool by which they shape policy outcomes is the federal budget. In general, the president of the United States proposes a budget. This proposal pays homage to the promises made on the campaign trail and is broadly reflective of the preferences they bring to office. In general, the Congress disregards this proposal and offers up its own preferences for federal spending. Congressional proposals are shaped by the preferences that dominate the House and the Senate. Every federal agency weighs in on proposals to increase or cut budgets, as do interest groups and individuals attached to the spending proposals. Passing a federal budget is a long, complex, and heavily negotiated process, but there is little regard to its impact on short-term deficits and the long-term debt.

The impact of public policy decisions and non-decisions can be felt in the general health of the economy, trade relations, international relations, defense arrangements, social well-being, and much, much more.

About the Game

The Fiscal Ship (http://fiscalship.org/ (Links to an external site.)Links to an external site.) challenges you to put the federal budget on a sustainable course. Measured as a share of gross domestic product, the federal debt is higher than at any time since the end of World War II and projected to climb to unprecedented levels. America is looking at a permanent, growing mismatch between revenues and spending, and policymakers are faced with difficult decisions about how to reconcile important government priorities—including retirement and health benefits promised to the growing number of old folks—with the tax revenues that the current tax code will yield. Today’s tax code won’t yield enough revenue to pay for basic services of government plus the retirement and health benefits promised to the growing number of old folks. So your mission is to pick from a menu of tax and spending options to reduce the debt from projected levels over the next 25 years. Small changes to spending and taxes won’t suffice. The choices are difficult, but the goal is achievable.

But budget decisions aren’t only about fiscal sustainability. They also shape the kind of country we live in. To win the game, you need to find a combination of policies that match your values and priorities AND set the budget on a sustainable course.

What to Look For

Inside the Game, you will find the categories in which most significant public policies can be organized:

Arts & Sciences

Children & Families

Corporate Taxes

Defense & Foreign Affairs

Education

Energy & the Environment

Food & Agriculture

Health

Income & Payroll Taxes

Infrastructure & Transportation

Law & Order

Labor & Employment

Other Taxes

Social Security

Tax Credits & Deductions

Taxes on Investments

According to the Game, the goals of public policies include:

Fight Climate Change

Rein in Entitlements

Shrink Government

Tax Cutter

Fiscal Hawk

Protect the Elderly

Invest in the Future

Reduce inequality

Strengthen National Defense

Strengthen Social Safety Net

Instructions

For purposes of this assignment, you are to run the simulation so that you can observe the outcomes through the lens of one of the three broad policy preferences provided in the game (you choose which one). They are:

  • The “centrists”: strengthen national defense, invest in the future, rein in entitlements
  • The “conservatives”: rein in entitlements, shrink government, tax cutter
  • The “progressives”: reduce inequality, invest in the future, strengthen the social safety net

Use one of these policy preferences to make budgetary decisions. For example, if you choose “centrist,” your three goals are to strengthen national defense, invest in the future, and rein in entitlements. If you choose “conservative,” your goals are to rein in entitlements, shrink government, and tax cutter. Finally, if you choose “progressive,” your goals are to reduce inequality, invest in the future, and strengthen the social safety net. When you run the simulation look for impacts on the budget projections. You will notice these as you tinker with policy decisions.

Essay

To complete this assignment, prepare an essay in which you respond to each of the prompts listed below. I recommend answering each prompt in its own paragraph. This structure provides you with a 5-paragraph format in which you can meet or exceed the minimum word count requirement.

  • What was your policy preference and why did you select it?
  • How difficult was it to pursue your goals while also hitting the debt target?
  • Did the policy options have the impacts—either on your fiscal target or governing goals—that you expected?
  • What do you think the political obstacles would be to enacting your plan?
  • What did you learn from doing this exercise?

You will prepare a 270 word (minimum) essay in which you respond to the prompts listed above. Your response must be written in academic English. You will use your own voice and write in your own words—no quotes or paraphrases allowed. To earn full points you must follow all instructions carefully, proofread for writing errors, and submit on time. Upload your essay by clicking on the yellow submit button to open the text box. Copy/paste your response into the text box and then click on the yellow submit button to submit your work.

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