Fiscal policy of the United States
It was the first time that the government took an active role in attempting to secure American individuals from unseen drastic changes in the market.
This problem diminished when the government called for many industries to convert to military production in the early 1940s[7] in order to prepare for World War II.
World War II forced the government to run huge deficits, or spend more than they were economically generating, in order to keep up with all of the production the US military needed.
[8] The military strategy of full employment had a huge benefit: the government's massive deficits were used to pay for the war, and ended the Great Depression.
The act declared the continuing policy and responsibility of the federal government to use all reasonable means to promote maximum (not full) employment, production, and purchasing power.
[10] In addition to focusing on keeping unemployment rates low, the act called for the creation of the Council of Economic Advisors.
[11] The United States government has tended to spend more money than it takes in, indicated by a national debt that was close to $1 billion at the beginning of the 20th century.
From fiscal years 1970 to 1997; although the country was nominally at peace during most of this time, the federal budget deficit accelerated, topping out (in absolute terms) at $290 billion for 1992.
In effect, the four year 'surplus' was only in public debt holdings, while the National Debt Outstanding increased every fiscal year (the lowest deficit in FY 2000 was $17.9 Billion)[12][13][14][15][16][17][18] However, after a combination of the dot-com bubble burst, the September 11 attacks, a dramatic increase in government spending (primarily in defense for military operations in Afghanistan and Iraq) and a $1.35 trillion tax cut, the budget returned to a deficit basis.
The main aim of adopting fiscal policy instruments is to promote sustainable growth in the economy and reduce the poverty levels within the community.
They are effective in jump-starting growth, supporting the financial systems, and mitigating the economic crisis on the vulnerable groups especially the low-income earners and the poor.
The government increases or reduces its budget allocation on public expenditure to ensure vital goods and services are provided to the citizens.
The policies define all the actions that the Federal government take in order to address issues like security, education, unemployment, poverty reduction among others.
Policies helps in cushioning the public against the eventualities in the labor market that may be due to competition or economic performance hence adversely affecting the average citizens.
In late 2007 to early 2008, the economy would enter a particularly bad recession as a result of high oil and food prices, and a substantial credit crisis leading to the bankruptcy and eventual federal take over of certain large and well established mortgage providers.
[1] As a result, the federal budget deficit increased to $1.2 trillion in fiscal year 2009, or 9.8% of the gross domestic product (GDP).
If current policy remains unchanged, the CBO projects the deficit will increase to 4.9 percent of GDP by 2026, or a cumulative total of $9.3 trillion over the period.
