Fiscal Policy Paper Essay Sample

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Our country’s budget deficits, surpluses and debt, affect every American and it is the government’s responsibility to set fiscal policies whose goals are to influence these situations by changing tax rates and government spending when necessary. Cuts and increases in government spending greatly impact American households who might depend on governmental programs such as those that supplement healthcare, elder care, and education. When there is a deficit, there is a low supply of money. Individuals are called upon to close the budget gap by paying more taxes. This leaves less for the consumption and lowers the standard of living. As the supply of money improves, taxes might be reduced but not necessarily so. The extra tax revenue could be used to reduce some of our outstanding debt.

Future Social Security and Medicare Users
Social Security and Medicare taxes are withheld from every worker’s paycheck. The main purpose of Social Security and Medicare is to safeguard retired workers from living in poverty. When it was first created, the concept was to withhold enough so that benefits could be paid to current retirees while saving some for the future. When there are surpluses, the government can either try to save more or pay out more in benefits. During deficits, the government will borrow funds from the social security system. In addition, the aging Baby Boomer generation has caused a situation where more benefits are being paid out than there are funds coming in. The combination of national budget deficits and the Social Security Trust’s deficit has caused great concern over the future of the whole system. It is forecasted that “after 2020, Treasury will redeem trust fund asset reserves to the extent that program cost exceeds tax revenue and interest earnings until depletion of total trust fund reserves in 2033” (Vance, 2013, para. 12). The system needs to be re-evaluated and plans need to be made to insure it will be available to younger generation workers.

Unemployed Individuals

University of Phoenix Students
How would University of Phoenix students be affected by budget deficits, budget surpluses, and debt? The biggest way would be with our financial aid we receive, the amount of money the government is able give out by means of the Pell Grant and also lend out through student loans. Another way that this would be affected would be with the amount of interest being charged on these student loans. Working students could also be affected by job loss or creation depending on the current status of the economy.

The International Financial Reputations of the United States

Domestic Automotive Manufacturing (exporter)
Exports are a big piece of the puzzle when it comes to foreign income that helps stimulate the U.S economy. Businesses that export goods, such as automotive manufacturers are impacted by U.S deficits, surpluses and dept. When the U.S deficit is high that tends to mean that Americans will have less money to spend, leading vehicle manufacturers to send their vehicles to countries were they will sell. A great example of the U.S deficit impact on vehicle manufacturing is the 2008 vehicle bailout crisis. Exports were not high enough to support the drastic decrease in continental sales (Colander, 2013). When there is a budget surplus that typically means the U.S economy is thriving. When the economy is in good standings exports generally decrease because there will be a higher money supply to be spent. The U.S government debt will positively or negatively impact the vehicle manufacturing exports in the same way. The high the U.S debt the more often the manufacturing companies will need to export in order to say in business. Italian Clothing Company (importer)

American companies are now using the phrase “Made in the USA” as a selling point for their products. This shows just how bog of a business imports are the U.S. The U.S deficit, surplus and U.S debt all have an impact of imports including business like an Italian clothing company, but not as large of an impact as they do on exporting. When the U.S deficit & debt are higher imports do tend to slow down, especially non-necessity items such as clothing. U.S surplus will allow the import of non-necessity items to increase since Americans will have a higher money supply to spend. The largest impact on Italian clothing companies has to do with the U.S deficit. As the economy has struggled over the past seven years many foreign country companies have started competing for the U.S import business. This has had a negative impact on many companies such as Italian clothing companies. In a recent study done in February 2014 the U.S imports a staggering $80 billion in clothing within 12 months (Chalabi, 2014). Within this study Italian clothing companies are thirteenth on the list accounting for only $ 1.3 billion, while Chinese clothing companies are first accounting for $29.6 billion (Chalabi, 2014).

When looking at budget deficits, budget surpluses, and debt as it relates to the GDP, the factor to look at is debt and budget deficits. As we look at GDP growing so then the government’s ability to carry more debt. GDP in perspective is like the nations income, so just like as an individual’s income rising they can incur more so can the government as the GDP rises. In regards to GDP and a budget deficit the larger the GDP is the larger a deficit that can be incurred by a government.

Vance, L.C. (2013, September). The Future of Social Security . The New American, (), . Retrieved from Colander, D. C. (2013). Macroeconomics (9th ed.). New York, NY: McGraw-Hill/Irwin. Chalabi, M. (April 23, 2014). Where the U.S. Gets Its Clothing After the Bangladesh Factory Collapse. Retrieved

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