United States Fiscal Policy

The economic issue of a country can be considered as one of the most important topic discussed in both the society and the government agencies. The Fiscal Policy is one issue that is studied in relation to the governing policies on economy. Fiscal policy can be defined as the guiding principles used by the government in relation to budget. The main components can be related to income and spending (Heakal, 2004). There are different issues that can be related to the US Fiscal Policy. Different groups present different perspectives.

The said policy is comprised mainly of the rules set by the government to earn income to be able to sustain the expenses needed by the nation. In that case, based on studies conducted by different groups, one of the perceived methods that are undertaken by the US government is to integrate the monetary and the fiscal policies on the attempt to be able to provide for the needs of the people. But based on the proportions of income and expenses of the country, as the income increases through different methods such as taxation, the expenses and maintenance needs also increases.

This is even magnified by the resulting deficits related to the imbalance created by such actions (Conte and Karr, 2001). The development of the Fiscal Policy in the United States had faced different problems. One of the classifications of such issues is related to the political aspect and another is the institutions that are for the development and the implementation of the policy. The US Fiscal policy can be considered as a continuously developing set of guidelines to be able to adapt to the budget needs on the goal of decreasing the deficits (Holmans, 1961).

The US Fiscal Policy can be considered as a work in progress because the results of the set guidelines are still studied to be able to continuously improve the incorporated concepts and data. Basically there are different phases in the process of development of the policy. One of the primary phases is the projection set by the president which is relayed to the Congress for further study with the inputs from lawmakers. Due to the fact that the Fiscal Policy is related to the concepts of income (taxes) and spending, the components of these factors are studied in depth.

Basically the policy can be considered as a guide for budgeting. The expenses of the different sectors are determined and more importantly their corresponding proportion. These areas that are basically given portion of the national budget are national defense, services for human health, transportation, education, etc. It is the Congress that specifically allocates the budget for every department and subdivision for further approval by the president (Conte and Karr, 2001). There US Fiscal Policy can be considered as one of the most controversial issue which is at the same time a necessity.

Controversy can be related to the different issues such as taxation, which in itself require a great deal of attention and in depth study to be able to achieve efficiency in the process. Another issue is the possible contribution of the renewed Fiscal Policy on the increasing deficit of the US, although the country can be considered as one of the nations with a developed and relatively stable economy (Barth and Pollard, 2006). The establishment of the Fiscal Policy in the US can be considered as having both positive and negative effects.

The negative effects can be considered as the main reason for the criticism regarding the issue. The policy enabled the disruption and diversion of the downward trend in the economy during 2001. This was made possible through the expansion of the budget to be able to make it sufficient. The result is a contradicting trend wherein there is a growing economy on the background of the increasing deficit. Thus, the limitations of the US Fiscal Policy, then again became the focus of the scrutiny of different sectors (Barth and Pollard, 2006; Heakal, 2004). The limitations of the fiscal policy are related to the current account.

This can be attributed to the fact that the implementation of the fiscal policy is based on the financial state of the country. Although the two variables can be considered as related, there are questions regarding the possible effect of the fiscal policy on the account deficit. Based on the study that was conducted, there is no real evidence that can be presented to dictate the relationship between the fiscal policy and the current account deficit, very drastic increase or decrease in the income and expenditures resulted to insignificant changes in the factor under study (account deficit) (Barth and Pollard, 2006).

The said notion is only one of the presented issues related to fiscal policy. It is common to question the policies being undertaken by the government, but it is important to consider that the continuous improvement of the governing policies and laws should be undertaken. Through the different criticisms on the US Fiscal Policy, it is still considered as the main governing tool being used by the US government to lead the country. For the said goal, the Fiscal Policy was expanded and improved intermittently.

Due to the fact that it is still a work in progress, the expansion is blindly following a road to improvement in the economy of the nation on the risk of the people. Looking at the national economic statistical data, US is a stable country, but the increasing household taxes, problems in migration processes, questions on industrial problems due to employment and manpower issues, etc. can be considered as serious problems that should not be present in a country with such economic capability (Conte and Karr, 2001).

Based on the study conducted, it is important to look back at the notions presented specifically the main goal of US Fiscal Policy. The control of tax revenues and other incomes as well as expenses to be able to affect inflation for the improvement of monetary strength is a simplified goal of the Fiscal Policy (Heakal, 2004). It is important to look back at the main goal before a country can get lost in its path. The US Fiscal Policy is a tool for economic improvement and not to increase deficit.


Conte, C. and Karr, A. R. (2001). US Economy. US Department of State. Heakal, R. (2004). What is Fiscal Policy? Investopedia. Retrieved June 3, 2007 from http://www. investopedia. com/articles/04/051904. asp Holmans, E. (1961). United States Fiscal Policy, 1945-1959: Its Contribution to Economic Stability. London: Oxford University Press. Barth, M. and Pollard, P. (2006). The Limits of Fiscal Policy in Current Account Adjustment. Department of the Treasury Office of International Affairs Occasional Paper No. 2.