George Washington's Fiscal Policy

1719 Words7 Pages
Fiscal Policy Fiscal Policy The national debt is a consecutive sum of every deficit less every surplus, from the time when George Washington was president. During its 236 years, the United States has borrowed more money than it has saved, so the U.S. is in debt not only to its national citizens but also to foreign governments by about $15.8 trillion and rising (U.S. debt clock, 2012). The U.S. can borrow money through the Department of Treasury’s issuance of bonds, which acts as IOUs from the federal government. Because Treasury bonds are a safe investment, they are easily acquired on the open market by U.S. businesses and households as well as foreign governments, businesses, and households. The deficit and the debt are not the same thing…show more content…
For example the automotive manufacturer General Motors (GM), in 2008 and 2009, received approximately $13.4 billion in bailout money from the Troubled Asset Relief Program (Tarp, 2012). The money from this program was paid for by U.S. taxpayers and was intended to help the automotive industry through some tough financial times while restructuring occurred. Eventually some automotive manufacturers went through bankruptcy to survive (PolitiFact, 2012). This affected the global economy by showing instability within the automotive industry and resulted in the loss of clients throughout the…show more content…
When the country has a surplus, the more the country retains of its total output, the more tax payers retain of their income. When the country has a budget deficit it devalues the GDP, as money earned from what the country produces will be lost in paying back the deficit. If a country has a GDP of $1 trillion and a budget deficit of $200 billion, the country only gains $800 billion on its GDP. Debt is similar to a deficit except debt builds up over the years and grows with each yearly deficit. The problem with debt is there is an interest payment that must be paid. Using the above example, the country's benefit from the GDP minus the deficit was $800 billion but the interest on the national debt is $20 billion. The country loses another $20 billion from its GDP bringing the net to $780 billion. These losses affect every tax payer as more tax dollars go to pay for what the country loses in GDP dollars (The Spectrum Group,

More about George Washington's Fiscal Policy

Open Document