Fiscal Policy Essay

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Fiscal policy as a response to the financial crisis has been a major discussion amongst economists in the United States. Fiscal policy is the means by which a government adjusts its level of spending in order to influence and supervise a nation's economy. Many individuals believe that President Obama has failed with his attempt at utilizing fiscal policy to attempt to fix the current financial crisis. The Economist article entitled, Fiscal policy failure or failure to try fiscal policy, focuses on the effect fiscal policy has had in response to the financial crisis. The fiscal stimulus that was implemented, according to data, failed because of different reasons. One of the main reasons it failed was because of the severity of the economic conditions in comparison to the bill. The bill also failed because the original purpose was to “counteract the effect of deep cuts to state and local government spending.” The article presents a chart of data that shows the track that fiscal policy has taken over the course of four years. Figure 1: Effect of Federal, State, and Local Fiscal Policy on GDP Growth Figure 1 shows quite a few different things. In the first year, net government contribution to GDP growth was positive. However, as time continued and the recession began to affect government budgets, local and state cuts had to be made, which caused a shift in fiscal policy at a national level. In the later years, we can see that state and local cuts tend to dwindle down. There are a few problems the economy faces currently. The economy faces the issue of “the run-off of stimulus programmes, the expiration of emergency unemployment benefits, and the expiration of lots of other tax proposals.” President Obama has implemented a new plan that looks to move the government impact on growth to between 1% and 2%. The article ends with the discussion

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