Government Spending and Tax Legislation

During the last years, the economy of the United States has come through the hard period of the world economic crisis. Actually, this period can also be marked as a period of high level of recession. Therefore, the government used to implement the expansionary fiscal policy. Such type of fiscal policy is used when the country is coming through the economic depression and recession period and is used to stimulate the economy. The main tools are reducing the taxes and giving people more money they can spend to give a stable profit to the business sector. Consequently, this will lead to the growing employment rate, business development and will make the state economic system work. In 2009, President Obama signed the American Recovery and Reinvestment Act that represented new tax cuts and other initiatives aimed to improve the actual economic situation. The administration continued this line, and the Fiscal Year 2013 Budget of the U.S. Government outlined the creation of two millions of new working places (Office of Management and Budget, 2013).

In addition, American economy has a lot of features of the contractionary one. Although the actual period requires the expansionary initiatives, the International Monetary Fund accused the United States fiscal policy of being too tight and rapid in its rates of increasing the fiscal adjustment and, therefore, undermining the needed expansion (Harding, 2013).

The way to impact the actual makers of fiscal policy that can be used by the consumers is to change their habits in the field of spending money. The main idea implemented by the specific economic programs and policies is to change the amount of money that circulates in the state economy. Thus, if the consumers begin to save more and spend less, this will lead to the decreasing profit of the business sector that provokes the systematic decline in the producing goods and services and growing unemployment. Finally, this may enforce producers to seek for alternative opportunities to make their products cheaper, for instance, seeking for the new manufactories or markets abroad. The need to open new markets is also mentioned in the Fiscal Year 2013 Budget of the U.S. Government. In contrast, when consumers begin to spend more, the economy will get the new push for the development, and the process will be followed by the stable growth in the business sector, employment rate and economy improvement after the recession (Cassidy, 2013).

The situation with the fiscal policy of the United States has been changing during the last five years. The world financial crisis has made the country experience economic recession (Walker, Kaplan, 2013). The main problem the government is trying to fix is the growing national debt rate, which is the main purpose for the more strict and harsh fiscal policy that has been implemented recently.

References

Cassidy, J. (2013). U.S. fiscal policy is upside down. The New Yorker. Retrieved from: http://www.newyorker.com/online/blogs/johncassidy/2013/02/us-fiscal-policy-is-upside-down.html.

Harding, R. (2013). IMF denounces US over fiscal tightening. The Financial Times. Retrieved from: http://www.ft.com/cms/s/0/e5bb3438-d4fc-11e2-9302-00144feab7de.html#axzz2eODv7n3K.

Office of Management and Budget. (2013). The fiscal year 2013 budget of the U.S. Government. Retrieved from: http://www.whitehouse.gov/sites/default/files/omb/budget/fy2013/assets/budget.pdf.

Walker, D., Kaplan, R. (2013). Current fiscal policy harms U.S. competitiveness. The CNN Money. Retrieved from: http://finance.fortune.cnn.com/2013/04/11/fiscal-policy-competitiveness/.

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