The strong performance of public finances in Sweden is an interesting case.Previous studies have compared the current crisis with the banking crisis in Sweden in the early 1990s to study the reason behind Sweden’s strong public finances (Flodén, 2013). When comparing the macroeconomic behavior during the current crisis and during the banking crisis in the early 1990s, it showed a larger drop in GDP and in exports while unemployment increased very less during the current crisis. The absence of large increase in unemployment rate explained the strong Swedish public finances. The relatively steady employment rate is due to the aggregated demand during the current crisis remained strong, and the lower employment in the manufacturing sector was offset by the increase in private sector. Another more important factor contributed to the high employment rate during the current crisis is the Swedish fiscal policy framework, which was established after the banking crisis in 1990s. The following analysis will explain how the fiscal framework can affect the Swedish public finances. 4.2. The Swedish Fiscal Framework The Swedish Fiscal Policy Framework was established in response to the earlier banking crisis in 1990s. The main objective of the fiscal framework is to attain fiscal stability. It consists of four main parts, (i) a balanced budget requirement for municipalities and county councils, (ii) an expenditure ceiling for the central government, (iii) a top-down budget process, (iv)
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Public debt is vexatious, but it is unlikely to precipitate a complete collapse of the American economy. Moreover, the sharp increase in public debt since the 2008 recession is within reason. The 2008 recession caused the loss of millions of jobs, which in-turn resulted in two notable effects—a reduction in government revenue due to diminishing tax receipts, and an increase in government spending due to an increase in unemployment. This exact paradigm occurred in virtually all
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 budget process is a powerful planning tool for government to make important resource decisions. According the Carney and Schoenfeld‘s article on How to read a Budget, an operating budget is a reflection of government’s financial plans. When a budget is
According to Shultz (2002), individuals and businesses fund the Federal Government through personal income and payroll taxes. With the unemployment rate at 8.1% as of January 1st, 2014 (Bureau of Labor Statistics, 2014), created an overall shortage in both individual and business taxes.
Yes, the welfare system has grown since the 1960’s. I feel the fiscal welfare system provides the most aid. Through tax increases the federal government is funded which in turn takes a portion of the tax revenue to fund social welfare programs. In addition, to tax credits, tax deductions, and other tax relief it provides a type of federal subsidy to middle and upper class individuals who have been long thought not to receive social welfare. More so, corporations and organizations receive tax breaks on their income more they spend on social welfare programs. All systems has developed because society has evolved placing individuals in each welfare system. I feel all welfare systems are a necessity because the welfare systems provide a type of
The system of public financing is one in which public funds cover either some portion or all of the election costs associated with running for office. In return for the public’s financial support, the candidates are limited in the amount they can spend during their campaign (Primo and Milyo 2006a). This system is beneficial to all three branches of government, and is arguably most influential on non-legislative candidates. This is because, the size of these legislators suppresses the power of any single member, and compels interest groups to look elsewhere for major influence (Primo 2006).
During the 1980’s and 1990’s, state and local governments saw a long period of fiscal stability in which revenues and expenditures stayed steady and predictable. With the dawn of a new century, Fisher (2003, p. 9), questioned if state and local government analysts and leaders would see a continuation of fiscal stability or a return to the previous dramatic instability of earlier decades. The circumstances that could affect stability, or changes in revenue and spending, are economic growth, demographics, public facilities and infrastructure.
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.
Sweden has maintained a sturdy economy since the early 19th century. They model their economy on a free market system, enabling it to thrive. Sweden was the first country to recover from the great depression in the 1930’s due to this economic model. Their government maintains the thriving economy by instilling policy to make it easier for its people to run profitable businesses. Over the course of history they have developed and honed this economic model and have become very good at it, maintaining its strength by keeping a high surplus for nearly 80 years until the recession of 2008. The world suffered a massive economic blow in 2009 and Sweden was not sheltered from it. Their Gross Domestic Product (GDP) fell 4.9 percent in 2009. Their GDP
Unemployment remains a fundamental challenge for policy makers around the globe as it simultaneously increases poverty and threatens social stability within a country (Goker, 2013). Even though the literature recognizes the critical role fiscal policy plays in mitigating unemployment and stabilizing the economy (Auerbach, Gale, and Harris, 2010), the extent to which it works effectively to achieve this remains an issue of debate amongst economists (Coate and Battaglini, 2011). However, the massive use of fiscal policy tools by governments in the wake of the 2008 financial crisis has, ignited a renewed interest in examining the role of fiscal policy in promoting growth and employment (Feldstein, 2009).
Most research has shown that the effects of public debt on economic growth differs across countries; depends on country-specific factors and institutions such as the level of fiscal imbalances, the level of debt sustainability, the level of financial deepening, macroeconomic stability, and political environment. In response to the financial and economic crisis of 2008/09, the accumulation of public debt and its effects on economic growth have received renewed attention among many economists and policy makers.
Public budgeting has various distinctions from other traditional budgeting procedures like personal or private-sector financials. There are certain considerations public budgeting must adhere to, such as the recognition that monies are of the people and thus, must be used accordingly to undertake the demands of the people. However, Rubin (2016) demonstrates that with limited resources of the government as well as numerous parties at interest, public budget is limited in choosing the priorities of the United States--thus public budgeting becomes immensely politicized. Joyce & Pattison (2010) illustrate the increased demand of government services in the United States, all while the public sector attempts to manage debts and remain accountable for their work. An exploration to understand the accountability dilemma, must be discussed, in which government cannot fully achieve all three principles of duty, including performance, fairness, and finances. Ebdon & Franklin (2006) examine the significance of citizen participation in the public budgeting process, as there is often a connection between the preferences of the citizens (the voters) and budget spending. Furthermore, the concept of a more inclusive role of citizens in the public budgeting process is explained more in depth by Bigle (2015). Bigle (2015) acknowledges the importance of citizen engagement in both the decision making process but also argues for increased governmental accountability to the people.
A Report for the Honorable Mayor, City Council, & Board of Directors of an African Country