Fiscal Policy Essay

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A tangible and important part of United States government and our country’s economics is fiscal policy. Fiscal policy is a tool of economic management by which government attempts to maintain a stable economy through its taxing and spending decisions. Taxing and spending levels can be adjusted in order to affect economic decisions. The government has attempted to manipulate the economy to varying degrees on a regular basis since the Great Depression of the 1930s. After an economic period of excess production and high inflation, a popular and effective fiscal policy action of the government would be to decrease government spending and increase taxes. On the contrary, if the economy has produced high employment and low productivity, a common government action is to increase spending on the demand side and cut business taxes on the supply side. Sometimes only one fiscal policy is implemented, such as the case of “Reaganomics.” Stimulation and manipulation of our economy are usually effective in stabilizing the economy on a regular basis and especially during recessionary periods, yet has unwelcome side effects that can last for decades. While President Franklin Roosevelt and our policymakers substantially increased spending to offset the poor economy in the 1930s via many celebrated government programs in response to the economic crisis he inherited, we now are facing the side effects of that policy, a bleeding social security problem. Another short-sighted, long-term effect of fiscal policy is that of deficit spending. Some of these investments/actions/gambles/plans are miscalculated, poorly administered, or simply unfortunate, and future budgets and future generations will suffer for unsuccessful fiscal policy actions. I believe in the Keynesian theory as long as the manipulation is on-par with the level of economic concern it is attempting to

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