Analysis of Discretionary Fiscal Policy Essay

The fiscal instrument is the budget, an annual statement from the government dealing with its income and expenditure plan for the next financial year. Fiscal Policy is an effective tool which can target specific sectors of the economy such as individual industries, unlike monetary policy which affects the economy as a whole; this is why the government implements a policy mix.

The fiscal policy is when the government changes its spending level and tax rates to monitor and influence their economy. The government will need to increase tax revenues to fund expenditure by increasing taxation by adjusting the income tax level.

The fiscal policy is when the government changes its spending level and tax rates to monitor and influence their economy. The government will need to increase tax revenues to fund expenditure by increasing taxation by adjusting the income tax level.

The federal budget is an annual plan created by the president of the United States that sets a certain amount of money to fund different federal expenses such as national defense, transportation, and income security, in fact; the federal expenses are divided into two categories, mandatory and discretionary spending. Mandatory spending is any expenditure that is required by legislation in which Medicare and Social Security are the main funded programs. In addition, discretionary spending is spending not mandatory but decided by congress based on appropriations in which it funds education, agriculture,and administration of justice, just to name a few. The federal budget is created using the constitution’s preamble as a guideline in order for

The U.S. government budget is made up of different content that present financial proposals from the President with advised importance for ration of revenue from the local government. More importantly, the budgets focus being the budget year. This is the next budgetary year where changes would have to be made by Congress. The budget not only covers the present year, but the next 4 years after the budget year to be able to resonate the outcome of budget verdicts past the extended term. This includes funding zones given for the present year in order for the reader to be able to make a comparison of Presidential budget propositions and the newest executed zones. Here the President starts the lengthy procedure of creating a budget by means of policy guidelines, at least 9 months prior sending his budget proposal off to Congress. Following the guidelines, the Budget Office along with Federal agencies create a policy for the present and future budget years.

Congress creates a budget by each fiscal year which divides funding into mandatory, and discretionary spending programs. Discretionary spending is implemented through appropriation

A macroeconomic policy is known at the government’s regulations to control or stimulate aggregate indicators for the economy. In other words, these are policies that focus on providing solutions to help stimulate economic growth and fight financial situations; in this case the recession. The macroeconomic policy that would be a legitimate solution to the recession would be Fiscal Policy, but more specifically, Expansionary Fiscal Policy. The reason why this would be a legitimate solution is because unlike Expansionary Monetary Policy, it has a more direct effect on aggregate demand. In other words, the government will aim to increase how much money is spent in order to stimulate aggregate demand. Furthermore, potential tax cuts will serve as a catalyst for spiking aggregate demand by granting people the capability to consume and invest (Forsythe, 2012). As an ultimate effect, the recession that America is going through will show more direct signs of economic growth, and will not have much of an influence in sparking inflation in the long

Fiscal Policy can be explained in many ways, for example. Fiscal policy is the use of the government budget to affect an economy. When the government decides on the taxes that it collects, the transfer payments it gives out, or the goods and services that it purchases, it is engaging in fiscal policy. The primary economic impact of any change in the government budget is felt by particular groups—a tax cut for families with children, for example, raises the disposable income of such families. Discussions of fiscal policy, however, usually focus on the effect of changes in the government budget on the overall economy—on such macroeconomic variables as GNP and unemployment and inflation.

One of the biggest benefits is that fiscal policy can be very effective in increasing the actual production and the decrease of the inflation rate. On the other hand, one of the mayors problems of fiscal policy is the increase in taxes. The benefits of monetary policy is basically its flexibility

The Congressional Budget Office (2012) assesses short-term impact of fiscal policy by relying on the predicted impact of changes in monetary policy by the Federal Reserve and the products of Macroeconomic Advisors and HIS Global Insight (Reichling and Whalen, 2012). The models used by these organizations assume economic output depends on labor supply, technology, available capital, and demand for goods and services. The validity of this model depends largely on the assumption that economic cycles recur with minor changes only.

The unprecedented government intervention during the massive economic crisis of the late 2000’s was met with varied sentiment of economists (Lee, 2009). For example, economist Marci Rossell felt that government intervention was arbitrary and lacked clarity as to which firms would receive government aid (Lee, 2009). She furthered her argument by stating that if the government bailed out homeowners and banks that were borrowing and lending “over their heads,” they were creating a dangerous precedent to set (Lee, 2009, p.40). However, Rossell praised the Obama administration for having a clear grasp on the economic situation and trusted in this administration’s guidance to recover from the economic crisis. Conversely, economist Steven Schwarcz said that though the government bailout in 2008 would cost more than it would have if the government had reacted more swiftly to early signs of recession, these institutions would collapse and fail without government aid (“How Three Economists,” 2008). If these institutions failed, the ripple effect of this failure to the U.S. economy would be irreparable.

The people of the United States are by the fiscal policies. Team C will address the how and why the U. S. budget deficits, budget surpluses, and debt affect different individuals and institutions. There is a wide array of individuals affected by fiscal policy, which include tax payers, future Social Security and Medicaid users. The unemployed individuals and University of Phoenix students will be affected by fiscal policy. The U.S. financial reputation, an exporter, and importer, and affects of the GDP will also be covered about the affects of the U.S. fiscal policy.

Incorrect setting of the interest rate creates bad fiscal policy because most fiscal policy is reactionary rather than planned. This means all the major economic policy programs in the United States were enacted during a time of crisis such as "The New Deal" et cetera. Since most economic policies are enacted while under political pressure, the long-term ramifications of such policies are often ignored. Social Security, Medicaid, and Medicare all are policies enacted without through sustainability analysis. Undeniably, the electorate has chosen to bankrupt the nation and reduce benefits by not addressing numerous unfunded liabilities.

| Advocates of active monetary and fiscal policy view the economy as inherently unstable and believe that policy can manage aggregate demand, and thereby, production and employment, to offset the inherent instability. When aggregate demand is inadequate to ensure full employment, policymakers should boost government spending, cut taxes, and expand money supply. However, when aggregate demand is excessive, risking higher inflation, policymakers should cut government spending, raise taxes, and reduce the money supply. Such policy actions put

In the years that followed the policy makers were given a crucial task of bringing the economy back from the shackles of the global economic slowdown. The