Expansionary or ContradictionaryThe American government manages the overall pace of economic activity and looks to sustain high employment levels and stability in prices. In order to achieve these goals the government uses Fiscal and Monetary policy. Fiscal policy is used to determine the appropriate level of spending and taxes, whereas monetary policy manages the supply of money in the economy. When the economy enters a recession, governments stimulate it with deficit spending, whereas during an economic growth governments control it with higher taxes to achieve a surplus. These policies are based on the concepts of British economist John Maynard Keynes (1883-1946). Consumers mainly influence fiscal policy by their spending habits. For instance, if they become concerned about the economy they will save more and spend less, which will result in less production, increase in unemployment level and an overall lower spending rate. In general, the power is held by the consumer. If we become more reasonable with our spending, saving and investing for the better, this would positively impact our economy. (Brooks)
During the past few years, the government of the United States has mostly been in an expansionary mode of fiscal policy. President Barack Obama signed the American Recovery and Reinvestment Act in year 2009, which provided lower taxes, loans and contracts and expanded rights. It was estimated that in 10 years time the legislation will increase the budget deficit of the United States by $787 billion. Research shows that the Recovery act maintained nearly 700 000 jobs in 2010. Taking in consideration president Obama took upon the office in one of the worst economic states after President Bush, he signed the Recovery Act almost immediately to bring back economic growth. In result, 6.35 million jobs were available for a period of 3 years and 3.5 million jobs by the end of last year. Had this act not been signed, the U.S. would have had 8.5 million jobs less and the rate of GDP would have been
The recession of 2008 saw the largest economic downturn in the American history. In response, the government has stepped in to address the shortfall of public aid and social assistance. Economic policy, including the stimulus, fiscal stimulus, spending cuts, tax hikes, tax cuts, growth of the labor market and the growth of foreign-produced goods were adopted. To make things easier for American workers, American workers elected the National Governors Association after several years. As the nation continued to grow in demand, the government took on various roles to get that demand met. Many of these are currently being implemented at public expense to the private sector such as: a; a; b; c; d; e; f; g; h; i; j. These are all government programs that were designed to solve the needs of the private sector, such as: a; b; c; d; e; f; g; h; i; j; k; l; m; n; o; p; q; r; s; t; u; v;w; x; y; z;
Source. Washington, DC and other federal agencies have contributed $3.6 billion to various national programs and programs, which provide $11 billion in support and $10 billion annually, to the private sector such as: a; b; c; d; e; f; g; h; i; j; j; k; l; m; n; o; q; r; s; t; u; v; w; x; y; z;
Source. From 2001 – fiscal year 2013, Congress increased spending to a maximum of $75 billion in an effort to address the federal deficit. In 2013, the total federal debt outstanding was $522.8 billion. The president’s budget plan proposes to spend $2.8 trillion of it, not including the federal surplus. This is a $5 trillion increase over the previous year, as it will account for over 90% of the government’s spending. By increasing the federal spending levels, Congress increases the amount of money provided to the private sector. As a result, the government uses about $1.6 trillion a year to spend on the general public.
Government spending is also funded by the use of the payroll tax and other taxes related to social security. Spending for Social Security is also increased by $800 billion. The tax was enacted back in 1977 in response to the economic decline and economic depression. In 2007, Congress included in President Bush’s budget plan a reduction rate of 25% from the existing 40% standard to 12% for individuals and $3.5 billion per year of personal income tax increases. Currently, federal government revenue of over $2 trillion was the only item in President Obama’s stimulus package but may be even less this year.
Federal spending of $800 billion is not equal to the debt. This is often true because the government cannot borrow for other types of domestic needs. As this is what has always been done in the economy. One of these is the private sector debt. It is estimated that for every additional dollar of federal government revenues it receives in a year, another dollar of taxes and fees are raised by private firms to cover the cost of paying taxes like federal income taxes. Because the private sector is not paying for the government’s debt, it can only afford to pay that cost. In exchange for lowering the national debt, the government would have to make a little more money to pay for those taxes. The question today is not which will have