Fiscal policy of the United States
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Fiscal policy is any changes the government makes to the national budget to influence a nation's economy.[1] "An essential purpose of this Financial Report is to help American citizens understand the current fiscal policy and the importance and magnitude of policy reforms essential to make it sustainable. A sustainable fiscal policy is explained as the debt held by the public to Gross Domestic Product which is either stable or declining over the long term" (Bureau of the fiscal service). The approach to economic policy in the United States was rather laissez-faire until the Great Depression. The government tried to stay away from economic matters as much as possible and hoped that a balanced budget would be maintained.[2] Prior to the Great Depression, the economy did have economic downturns and some were quite severe. However, the economy tended to self-correct so the laissez faire approach to the economy tended to work.
President
History
The Great Depression
The Great Depression struck countries in the late 1920s and continued throughout the entire 1930's. It affected some countries more than others, and the effects in the US were detrimental. In 1933, 25 percent of all workers were unemployed in America.[4] Many families starved or lost their homes. Some tried traveling to the West to find work, also to no avail.
The Great Depression showed the American population that there was a growing need for the government to manage economic affairs. The size of the federal government began rapidly expanding in the 1930s, growing from 553,000 paid civilian employees in the late 1920s to 953,891 employees in 1939. The budget grew substantially as well. In 1939, federal receipts of the administrative budget were 5.50 percent of Gross National Product,
Another contributor to changing the role of government in the 1930s was President Franklin Delano Roosevelt. FDR was important because of his creation of the New Deal, which was a program that would offer relief, recovery, and reform to the American nation.[5] In terms of relief, new organizations, such as the Works Progress Administration, saved many U.S. lives. The reform aspect was indeed the most influential in the New Deal, for it forever changed the role of government in the U.S. economy. In essence, it was the beginning of fiscal policy. It was the first time that the government took an active role in attempting to secure American individuals from unseen drastic changes in the market.[6]
Although the relief and reform aspects of the New Deal proved to be effective for Americans, recovery was an issue that did not.
World War II and effects
World War II forced the government to run huge deficits, or spend more than they were economically generating, in order to keep up with all of the production the US military needed. By running deficits, the economy recovered, and America rebounded from its drought of unemployment.[8] The military strategy of full employment had a huge benefit: the government’s massive deficits were used to pay for the war, and ended the Great Depression.[9] This phenomenon set the standard and showed just how necessary it was for the government play an active role in fiscal policy.[8]
The
Modern fiscal policy
The United States government has tended to spend more money than it takes in, indicated by a national debt that was close to $1 billion at the beginning of the 20th century. The budget for most of the 20th century followed a pattern of deficits during wartime and economic crises, and surpluses during periods of peacetime economic expansion.
In 1971, at Bretton Woods, the US went off the gold standard allowing the dollar to float. Shortly after that, the price of oil was pegged to gold rather than the dollar by OPEC. The 70s were marked by oil shocks, recessions and inflation in the US. From fiscal years 1970 to 1997; although the country was nominally at peace during most of this time, the federal budget deficit accelerated, topping out (in absolute terms) at $290 billion for 1992.
Fiscal policy is the application of taxation and government spending to influence economic performance. The main aim of adopting fiscal policy instruments is to promote
In late 2007 to early 2008, the economy would enter
See also
- Criticism of the Federal Reserve
- Office of Management and Budget
- Congressional Budget Office
- U.S. public debt
- Foreign aid
References
- ^ Heakal, Reem. "What is Fiscal Policy". Retrieved 24 February 2011.
- ^ "Laissez-Faire". u-s-history.com. Retrieved 1 March 2011.
- ^ "Fiscal Policy". Encyclopædia Britannica (Encyclopædia Britannica Online ed.). 2011. Retrieved 23 February 2011.
- ^ a b Schwenk, Albert E. "Compensation from before WW I through the Great Depression". United States Department of Labor.
- ^ Bryant, Joyce. "The Great Depression and New Deal". yale.edu. Retrieved 8 March 2011.
- ^ "FDR's New Deal". schmoop.com.
- ^ backend. "The American Economy during WWII". eh.net. Archived from the original on 15 March 2011. Retrieved 8 March 2011.
- ^ a b Lipsky, John. "Fiscal policy challenges in post-crisis world". Retrieved 11 March 2011.
- ^ "America's Great Depression". ametecon dot com. Retrieved 11 March 2011.
- ^ Fisher, Louis. "Employment Act of 1946". Major Acts of Congress. Retrieved 11 March 2011.
- ^ a b "FULL EMPLOYMENT ACT OF 1946". The Gale Group. Retrieved 11 March 2011.
- ^ "The Myth of the Clinton Surplus".
- ^ Gordon, John Steele (21 May 2009). "Why Government Can't Run a Business". Wall Street Journal.
- ^ "Clip: Senate Session - C-SPAN Video Library". Archived from the original on 2012-09-25. Retrieved 2014-07-01.
- ^ "The U. S. Government". Archived from the original on 2013-05-16. Retrieved 2013-01-24.
- ^ http://www.cbpp.org/cms/index.cfm?fa=view&id=1654
- ^ "The only way to fix Social Security - Aug. 20, 2008".
- ^ "The Surplus Hoax". 3 November 2000.
- ^ https://www.fiscal.treasury.gov/fsreports/rpt/finrep/fr/15frusg/CitizensGuide2015.pdf Financial Report of the United States Government 2015, "Citizens Guide to the Fiscal Year 2015," published 2016-02-26
- ^ https://www.cbo.gov/publication/51384 Congressional Budget Office, "Updated Budget Projections: 2016 to 2026," published 2016-03-24
- ^ https://trumpwhitehouse.archives.gov/omb/budget/Historicals Budget of the United States Government, Fiscal Year 2017, "Historical Tables: Summary of Receipts, Outlays, and Surpluses or Deficits (-) as Percentages of GDP: 1930–2021," retrieved 2016-06-11
External links
- Savings rate viz Fiscal Deficit Historical comparism of the Savings rate viz Fiscal Deficit ( since 1981 )