Reference no: EM132405815
Please answer according to the question, thank you.
We've talked a lot about the economy, and the role of the Government sector in our economy. Now we address some policies that the Government takes to ensure responsible economic growth.
We start with an understanding and discussion of Fiscal Policies. Fiscal policies either grow or slow the economy through deliberate changes in Government spending and/or taxes. I always begin this discussion in the classroom with lectures of the Kensian model, developed by economist John Meynerd Keynes. His model shows the importance of total spend (for all 3 sectors) to equal total production. IF we spend more than we produce, it leads to inflation. IF we spend less, it can lead to recession. The goal is to have an equilibrium GDP, where total spend is equal to total production.
Now if the Government sees a need to increase spending, they can either spend on things like infrastructure, or tax less, putting more $ in the hands of consumers to spend. Conversely, if they want to slow spending, they do just the opposite. All of this sounds simple, but requires a delicate balance. If we spend more, the debt grows, and it's already at a mind boggling $22 trillion. And if we tax less, we bring in even less money to pay off the debt. Conversely, if we do the opposite, the economy slows and could lead to recession. Not an easy solution. Some people say, we need less government. I say, we need SMART government.
Important for you to understand fiscal policy, how and why it's used, and what happens if we are not at equilibrium GDP. Also, understand the debt. While that $22 tril the US owes is extremely high, it doesn't seem quite as bad when you realize that its just slightly more than the US GDP, and that most of the money is actually owed back to the American Gov't and American interests. Roughly 25% is owed to foreign countries, who have invested in the US because they view this as a safe and good investment.
During Obama's early years in office, he authored a stimulus plan to get the US out of recession. This did in fact get our GDP back to growth, and proved more effective than Europe's austerity measures, which were designed to spend less Government money and reduce debt. But it also increased our debt. Much of Europe still has not fully recovered from the great recession. Now with Donald Trump in office, the GDP is growing at a healthy rate with high employment. but our debt continues to increase and fears of growing inflation without increased wages could offset those benefits.
The topic for discussion, What fiscal policies, if any, do you believe should be applied to responsibly manage our economy. The Trump administration has already passed a huge tax decrease: was that enough, were the tax breaks in the right places, or should we tax more to provide needed services and/or reduce the debt.... What should the Government spend on and who should pay? These choices are also very important in who we elect for the 2020 presidential campaign. Again, provide factual information and ideas, and not political rhetoric to support your thoughts.