Economic Policy of the United States | My Paper Hub
It’s a daunting task to create a perfect
It’s a daunting task to create a perfect
economic policy especially when you’re dealing with a superpower like the
United States. All the presidents of the United States are tasked with coming
up with policies that restore the global competitiveness of the United States.
However, having a prosperous economy is just a dream that proves difficult to
achieve. A brief look into the national debt and deficit will bring this matter
The national debt and the deficit have a
huge difference that is clear. First, the national debt is also commonly known
as the public debt, and it refers to the cumulative amount of money that
results from the borrowing of the federal government to make up for budget
deficits that accrued in previous years. The deficit on the other hand usually
illustrates the difference between the money the government spent in a year
(usually called outlays) and what it received in the form of taxes and other
revenues known as receipts. For instance, the deficit skyrocketed during the
recession because the government was spending a lot to revive the economy
through stimulus programs and unemployment benefits yet incomes were dropping,
and it was receiving less tax revenue. However, since the recession ended, the
annual deficit has declined. Nevertheless, the cumulative national debt may
still spike even if the “shortfall” (which refers to the size of the deficit)
decreases from one year to another. The reason for this is that the government
will still be borrowing money even if it’s less than the previous amount
borrowed. It may even have a budget surplus for one year but still, have a
substantial national debt that has slowly accrued over time (Cohen, Patricia).
According to the treasury department,
the financial year 2017 had a deficit of $666 billion, which was 14% higher
than the Financial year 2016. The government revenue for the fiscal year 2017
was a record $3.3 trillion but so was its expenditure which stood at $4
trillion (Davidson, Kate). Several reasons can be attributed to the reason why
the deficit has been increasing over time. One of the main reasons including
the financial crisis of 2008. The crisis significantly reduced the tax revenues
including other revenues as the economy plummeted. Government receipts
decreased from its record of $2.57 trillion before the recession in the 2007
Financial Year to $2.1 trillion in the 2009 Financial year. The trend was not
pleasant until the Financial year 2013 when the income rose to $2.78 trillion.
As a result, an economic stimulus package of a whopping $787 billion had to be
added to the 2009 deficit. The package was induced to fund public works
projects that would create more job opportunities. It was also used to extend
unemployment benefits and cut taxes. The whole was done in a bid to bail out
the economy from recession, which was achieved in the second quarter of 2009.
The second factor is mandatory and
military spending. The war on terror after the September 11 attacks forced the
United States government to double annual military spending. When the war began
in 2003, the United States expenditure on the military was $437.4 billion. By
2011, the military spending was at $855.1 billion. Mandatory spending has also
increased the deficit. These include payouts for mandated programs including
Medicare, Medicaid, and Social Security among others. Since the Financial Year
2011, this expenditure has been an excess of $ 2 trillion which signifies how
they consume a significant portion of the revenue annually. Unfortunately, only
the Congress can amend such benefits of these programs. The act would need an
almost impossible majority vote from both houses. The current beneficiaries are
not willing to incur “loses” if the benefits are reduced(Hart-Landsberg, Marty).
Third, health care spending is growing
fast. In fact, this sector of the US government expenditure is reported to be
the fastest growing. The trend in health care spending is not different even in
the private sector. The control over costs in the US is not taken seriously
like the European healthcare systems because their principles of payments are
disparate. Nevertheless, the deficit for the fiscal year 2018 has significantly
reduced to $440 billion. The shortfall arose since the government revenue of
$3.654 trillion was less than the government spending of $4.094 trillion.
America boasts of the most powerful
economy in the world, and therefore, its economic policymakers have an uphill
task. Being the engine of economic growth in any part of the universe, a
healthy US economy means that there will be an improvement in the quality of
life of billions of individuals across the globe. However, the US has its
significant share of trouble in maintaining a healthy economy. The national
debt is currently over $20 trillion, and the deficit is still enormous. The
government spending should be curtailed to minimize the deficit.
As of September 2018, the US national
debt was an excess of $20 trillion. The most logical solution to dealing with
public debt is decreasing government spending significantly and hike taxes to
an equal amount("Getting
America Out Of Debt | National Debt Solutions") . Each of these two
options will minimize the deficit equally which is an advantage. However, both
have different impacts on job creation and economic growth. For instance,
increasing income tax will reduce job creation and decrease demand because
consumers do not have money. Keeping in mind that 70 percent of economic growth
is determined by consumer spending, this would be hurting the economy. Reduced
spending will mean fewer government funds are being pumped into the economy. On
the other hand, decreasing government spending on education, infrastructure, and
basic scientific research would decrease the future productivity of the country
Americans have seen the devastating
economic effects of bad economic policies and there looking to support the
current government into having favorable economic policies. The best example is
that polls are indicating most Americans understand if they have to incur
higher taxes to rebuild their tarnished economy.
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