Fiscal Policy

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Fiscal Policy

ECO/372

Fiscal Policy

In the current economic recession, the United States’ fiscal policy has placed unrest and instability among the population. The positive and negative outcomes of the fiscal policy, with regard to the country’s deficit, surplus, and debt, have different effects on how many different people and organizations view the current economy, make decisions, and react to changes. The Unites States’ deficit, surplus, and debt affect not just the American tax payers but also future social security and Medicare users, unemployed individuals, students, exporters, and importers. The deficit, surplus, and debt also affect the gross domestic product (GDP) and also the United State’s financial reputation on an international level. Focus must be placed on making objective decisions that will provide both short-term and long-term benefits especially during economic uncertainty. Individual decisions during a recession has a great impact on the economy collectively; when people reinvest and increase spending in the tough economy, it can propel the economy towards the upward trend.

Tax Payers

American tax payers ultimately hold the most important part in the economy. The tax payer and the economy have a compelling role with each other and often dictate the success or failure of one another. A deficit can devalue the U.S. dollar an place a burden on the tax payers. During an economic deficit, tax payers lose because of the need for increased tax to help stimulate the economy. During a surplus economy, tax payers can take advantage of benefiting from additional capital within the economy and also benefit from a possible tax decrease. The national debt is a burden to all tax payers because of the need for increased taxation and government program reduction in an attempt to reduce the debt. Debt can also burden future generations with problem of paying back the debt.

Future Social Security and Medicare Users

Every individual should be concerned with economic conditions. It is even more important for those individuals eligible for future social security and Medicare users. During a surplus economy, government is able to provide more benefits and possibly reduce or even eliminate tax implications that are placed on social security and Medicare users. Quality of life could dramatically increase to those individuals because of more funds available. On the other hand, deficit implies an unhealthy economy in a state of despair and unrest. During a deficit, government has to take steps to relieve the deficit by impacting government programs to include social security and Medicare programs. The government will cut back on funding and may even borrow against the funds designated to these programs causing burdens to the beneficiaries. Debt can also burden social security and Medicare beneficiaries because of the devaluation of the U.S. dollar and greatly impact the user’s ability to receive the government program benefits and services.

Unemployed Individuals

The national deficit affects unemployment because it makes it even harder for the unemployed to find a job in the workforce. Companies may have slower business and companies may not hire because of lack of work available to people. Companies may even lay off workers to compensate from lack of business and more layoffs mean more unemployment. A deficit will eventually lead to more people filing for unemployment benefits, burdening the government program at the same time. The unemployed will end up cutting personal expenses and pour even less money into the economy affecting local businesses. The cycle continues until there is an upturn in the economy. During a surplus, it is the complete opposite of the deficit cycle; less people are unemployed, more people have more money to spend, goods and services are in high demand, and businesses need more employees to satisfy customer demands. One drawback to this cycle is that...
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