INTRODUCTION
Reason to choose the topic
The United States is experiencing rapid economic growth, prompting businesses to expand production to meet the ever-increasing consumer demand However, this surge in goods often leads to oversupply and inflation, as production outpaces human needs Throughout history, from the Great Depression to the present, the U.S government has grappled with finding effective monetary and fiscal policies to ensure sustainable growth and price stability This complex challenge has seen its share of failures, necessitating government intervention through fiscal policies Understanding how these fiscal measures impact the U.S economy is crucial, as they play a significant role in maintaining America's global position and fostering continued development.
Despite the rapid economic growth in the United States, businesses are striving to increase production to meet the ever-growing consumer demand This surge in goods can inadvertently lead to dissatisfaction, as the supply of commodities often outpaces human needs, causing over-supply and inflation To address these challenges, it is essential for the government to implement effective fiscal policies Understanding the significant impact of fiscal policy on the US economy is crucial, making it a vital topic for study.
The fiscal policy of the United States plays a crucial role in shaping the nation's economic landscape Through strategic government spending and tax policies, fiscal measures aim to influence economic growth, stabilize prices, and reduce unemployment Understanding the impact of these policies is essential for effective economic management and planning Research in this area provides valuable insights into how fiscal decisions affect various sectors and the overall economy By analyzing historical data and current trends, policymakers can make informed choices that promote sustainable economic development.
Fiscal policy plays a crucial role in maintaining macroeconomic stability and fostering economic development, particularly in major economies like the United States As these countries face inflation or recession, effective fiscal measures are essential for rebalancing the market economy The influence of the US economy extends globally, making it vital to understand its impact on economic transformation This overview highlights the importance of researching fiscal policy and its implications for both national and international economic landscapes.
Objectives of the research
In today's open economy, the effectiveness of fiscal policy is influenced by the exchange rate regime Under a fixed exchange rate regime, fiscal policy proves effective, whereas in a floating exchange rate regime, its impact diminishes as exchange rate fluctuations can counteract fiscal measures This article will explore the dynamics of fiscal policy and its functioning within the United States economy.
Some goals we will achieve in the research
This research aims to clarify America's fiscal policy, detailing its fundamental definition, operational mechanisms, and theoretical adjustments related to federal spending and taxation It will also examine the effects of fiscal policy actions on the US economy and provide policy implications to support the country's development.
- How is the United States government implementing fiscal policy to stabilize the economy?
- What are comments and implications policy for the United States?
The fiscal policy of the United States plays a crucial role in shaping the nation's economic landscape It encompasses government spending and taxation strategies aimed at influencing economic growth, inflation, and employment levels By adjusting these financial levers, policymakers can respond to economic challenges and stimulate recovery during downturns Understanding the implications of fiscal policy is essential for assessing its impact on both short-term and long-term economic stability Comprehensive scientific research continues to analyze the effectiveness of these policies, providing insights that can guide future decision-making.
Scope and object of the research
In order to grasp the nuances of the US fiscal policy in 2018, it is essential to comprehend the fundamental aspects of fiscal policy, including its key tools and the potential for a multiplier effect Additionally, examining the trends in fiscal policy interventions during that year and recognizing the limitations of fiscal policy will provide a comprehensive understanding of its impact on the economy.
Research objects: fiscal policy to stabilize the economy in a country.
Research method and data of the research
To enhance understanding of US fiscal policy, we employ four key measures utilizing secondary data First, we apply an analytical method to elucidate the main concepts associated with the topic Second, we use a synthesis method to summarize the viewpoints that shape US fiscal policy Third, we implement statistical analysis to examine data reflecting US development across various periods Finally, we compare individual differences to highlight how growth levels can be distinctly observed.
Structure of the research
The content of the report includes four main sections There are:
- Chapter one is general introduction to the topic
- Chapter two is some theoretical concepts related to the United State fiscal policy
- Chapter three we will analysis some clear cases in point of United State fiscal policy
- Finally, conclusion and policy implications are chapter four of the research
Scientific research plays a crucial role in shaping the fiscal policy of the United States By analyzing data and trends, researchers provide insights that inform government decisions on taxation and spending This evidence-based approach helps to create policies that promote economic stability and growth Understanding the impact of fiscal policy on various sectors is essential for effective governance Ultimately, the collaboration between scientific research and fiscal policy leads to more informed decisions that benefit the economy and society as a whole.
FISCAL POLICY THEORIES
Definition of fiscal policy
Fiscal policy involves government spending and tax strategies to influence economic factors such as consumer demand, wages, inflation, and overall economic growth It works alongside monetary policy, which is managed by a central bank to regulate a country's money supply Together, these policies aim to achieve specific economic objectives within a region As a macroeconomic tool, fiscal policy significantly affects the level of economic activity, primarily impacting aggregate demand for goods and services in the short term.
Keynes argued in 1930 that the government had to boost spending and be able to tolerate a budget deficit to shift the economy from an unemployed state to a near-full state
*The tools of fiscal policy: Government spending and taxation
Government spending involves the procurement of various products and facilities, such as new vehicles for federal officials or national defense missiles As a key component of fiscal policy, government spending can significantly influence real GDP by either stimulating or contracting economic activity By adjusting budget expenditures, the government directly impacts overall economic performance.
Government spending significantly impacts the economy by creating a multiplier effect When the government purchases goods and services, it directly benefits businesses, which in turn boosts their revenue As these businesses pay their employees, the resulting paychecks enable consumers to spend more, further contributing to the growth of GDP.
Taxes are a fiscal policy instrument because tax increases impact the In this section, we will examine in detail a single country's fiscal policy which is the US
Scientific research plays a crucial role in shaping the fiscal policy of the United States By analyzing economic data and trends, researchers provide insights that inform government spending and taxation decisions Effective fiscal policy relies on evidence-based strategies to stimulate growth and address economic challenges Additionally, collaboration between researchers and policymakers can enhance the development of innovative solutions to pressing fiscal issues Ultimately, the integration of scientific research into fiscal policy fosters a more resilient and adaptive economy.
From 2018 to 2020, changes in the average customer's income and spending habits positively impacted real GDP Consequently, government actions, such as altering tax structures, play a crucial role in influencing economic production This can involve increasing or decreasing marginal tax rates, completely abolishing certain taxes, or modifying existing tax laws to stimulate growth.
*Expansionary and contractionary of fiscal policy Expansionary fiscal policy:
During the recession of 2008-2009, the U.S economy experienced a significant downturn, as illustrated in Figure 1, where the intersection of aggregate demand (AD0) and aggregate supply (AS0) occurred below potential GDP This equilibrium (E0) resulted in rising unemployment The analysis employs a Keynesian perspective, focusing on short-term macroeconomic policy rather than a neoclassical long-term view To combat this recession, expansionary fiscal policies, such as tax cuts or increased government spending, can effectively shift aggregate demand to AD1, moving the economy closer to full employment and raising the price level to P1, which aligns with potential GDP.
Figure 1: Expansionary Fiscal Policy (Source: OpenStax College, 2016)
Scientific research plays a crucial role in shaping the fiscal policy of the United States By providing data-driven insights, research informs government decisions on taxation, spending, and economic growth Understanding the impact of fiscal policy on various sectors enables policymakers to create effective strategies that promote stability and prosperity Furthermore, ongoing research helps evaluate the effectiveness of existing policies, guiding necessary adjustments to meet changing economic conditions Ultimately, the integration of scientific research into fiscal policy formulation is essential for fostering a resilient and dynamic economy.
The original equilibrium (E0) indicates a recession, with output (Yr) falling short of potential GDP However, an expansionary fiscal policy can shift aggregate demand from AD0 to AD1, moving the economy to a new equilibrium output (E1) at potential GDP Given that the economy was initially underperforming, the resulting inflationary increase in the price level from P0 to P1 is expected to be relatively modest.
Fiscal policy can effectively mitigate an overheating economy by implementing contractionary measures, such as federal spending cuts or tax increases When macroeconomic equilibrium exceeds potential GDP, as illustrated in Figure 2, the intersection of aggregate demand (AD0) and aggregate supply (AS0) occurs at equilibrium E0 By reducing aggregate demand to AD1, these fiscal adjustments help alleviate upward pressure on the price level, resulting in a new equilibrium E1 that aligns with potential GDP.
Figure 2: A Contractionary Fiscal Policy (Source: OpenStax College,
2016) The economy starts at the equilibrium quantity of output Yr, which is above potential GDP The extremely high level of aggregate demand will generate
The fiscal policy of the United States plays a crucial role in shaping the nation's economic landscape It involves government spending and taxation decisions that directly impact economic growth and stability Understanding the implications of fiscal policy is essential for policymakers and economists alike, as it influences inflation rates, employment levels, and overall economic health By analyzing scientific research on fiscal policy, we can gain insights into its effectiveness and potential improvements for future economic strategies.
A contractionary fiscal policy can effectively reduce aggregate demand from AD0 to AD1, resulting in a new equilibrium output E1 at potential GDP amidst inflationary price increases The AD-AS model does not specify the method for implementing this contractionary policy; options may include spending cuts, tax increases, or a tailored approach based on the specific economic context Ultimately, the model emphasizes the necessity of decreasing aggregate demand in such scenarios.
Fiscal policy influences aggregate demand
Aggregate demand (AD) is a key macroeconomic concept that reflects the total demand for goods and services within an economy It is influenced by fiscal policies, particularly through changes in government purchases AD is calculated using the same formula as gross domestic product (GDP), incorporating components such as consumer spending (C), investment in business capital (I), government spending on public goods (G), exports (EX), and imports (IM) (Hall, 2019).
A budgeting deficit occurs when there is a discrepancy between budget revenue and current account expenditures, leading to a shortfall in financial resources This deficit arises when government tax costs exceed revenue collections, resulting in a budget account deficit, or when revenue disbursements surpass capital expenditures, creating a capital account deficit Typically, the budget deficit is represented as a percentage of the Gross Domestic Product (GDP).
Scientific research plays a crucial role in shaping the fiscal policy of the United States It informs decision-making processes, providing data-driven insights that influence government spending and taxation strategies By understanding economic trends and societal needs, scientific research helps policymakers create effective fiscal policies that promote growth and stability Ultimately, the integration of scientific findings into fiscal policy ensures that the government can respond effectively to changing economic conditions and public demands.
Figure 3 Graphical system of budget deficit (Source: Policonomics) :
When a country experiences a budget deficit, the supply of loanable funds decreases, shifting the supply curve to the left and resulting in reduced gross benefits This shift leads to a lower equilibrium quantity of loanable funds while increasing the real interest rate to i1 The rise in the real interest rate curtails net capital outflow, which subsequently diminishes the euro available for foreign currency exchange, ultimately driving up the actual exchange rate.
Tax cuts reduce the total revenue collected from taxpayers, impacting government income These reductions are popular among voters as they help save money Tax cuts can take various forms, including reductions in income taxes, sales taxes, or property taxes, and may be implemented as a one-time adjustment.
The fiscal policy of the United States plays a crucial role in shaping the nation's economic landscape It involves government spending and taxation decisions that influence economic growth, inflation, and employment rates Understanding the implications of these policies is essential for assessing their impact on various sectors and the overall economy Scientific research contributes significantly to this understanding by providing data-driven insights and analyses that inform policymakers By evaluating the effectiveness of fiscal measures, researchers help ensure that economic strategies align with the nation's goals for prosperity and stability.
9 refund, an average premium drop, or a tax credit Tax cuts include tax exemptions, exceptions, or grants, too
Figure 4: Graphical system of tax cuts (Source: Authors, 2020)
Changes in taxes significantly influence aggregate demand, with the perception of a tax change as either permanent or temporary playing a crucial role When the government reduces taxes, it stimulates consumption, leading to increased income and profits, which further boosts consumption This rise in income generates higher demand for goods and services, often resulting in elevated interest rates Consequently, higher interest rates can make borrowing more challenging, leading to a decrease in investment spending Overall, tax reductions not only enhance consumption but also shift aggregate demand to the right.
During a recession, a decline in aggregate demand leads to a recessionary gap, resulting in decreased output and higher unemployment To combat this, the government can implement expansionary fiscal policy by lowering taxes, increasing government spending, or both, to boost aggregate demand and achieve full employment output However, such measures typically create a budget deficit due to increased government expenditure.
The fiscal policy of the United States plays a crucial role in shaping the nation's economic landscape It involves government spending and taxation decisions that influence economic growth, inflation, and employment rates By adjusting fiscal policies, the government aims to stabilize the economy during fluctuations and promote long-term prosperity Understanding the impacts of these policies is essential for policymakers and citizens alike, as they directly affect public services, infrastructure, and overall quality of life Continuous scientific research is vital in analyzing the effectiveness of fiscal strategies and ensuring informed decision-making for future economic challenges.
10 more than its revenue in a year, and such deficits add to the national debt (Brian Blackstone, 2014)
Using fiscal policy to stabilize the economy
Active stabilization policy is a government or bank strategy aimed at ensuring stable economic growth and minimal price fluctuations To maintain policy stability, it's essential to monitor the business cycle and adjust benchmark rates to address sudden demand changes Properly implemented monetary policy can counterbalance fiscal policy shifts The government should avoid causing economic fluctuations and instead respond to changes in the private sector to stabilize aggregate demand According to Keynes, fluctuations in aggregate demand are often driven by irrational waves of optimism and pessimism For instance, when taxes are increased, aggregate demand decreases, leading to lower production and employment in the short term In times of pessimism, the government can expand monetary policy to mitigate negative impacts.
Monetary expansion leads to reduced interest rates, boosting consumer spending and aggregate demand When monetary policy is effectively implemented, it can maintain stable aggregate demand despite fiscal policy changes In times of optimism, increased spending by households and businesses can elevate aggregate demand, production levels, and create inflationary pressures.
The argument against active stabilization policy highlights the lagging effects of monetary policy on the economy Proposals to ease monetary policy have emerged to achieve the 2020 growth target set by the President, particularly as many industries struggle due to the impacts of Covid-19 However, concerns about financial inflation persist Notably, the US economy failed to reach its 2018 growth target of 3%, despite the stimulus from the President's tax reforms, and it continues to lose momentum In the third quarter of this year, the inflation-adjusted GDP grew at an annual rate of 1.9%, a decline from 2% in the prior quarter.
The fiscal policy of the United States plays a critical role in shaping the nation's economic landscape Through various government spending and taxation strategies, fiscal policy influences economic growth, inflation, and unemployment rates Understanding the impact of fiscal policy is essential for evaluating its effectiveness in addressing economic challenges Ongoing scientific research into fiscal policy helps policymakers make informed decisions that promote stability and growth in the U.S economy.
Automatic stabilizers are fiscal policy tools that automatically stimulate aggregate demand during economic recessions without requiring deliberate government intervention The most significant automatic stabilizer is the tax system, particularly progressively graduated corporate and personal income taxes, along with transfer systems like unemployment insurance and welfare These stabilizers play a crucial role in mitigating fluctuations in the business cycle, as they are activated automatically and effectively help stabilize economic activity By functioning without the need for timely government authorization, automatic stabilizers ensure a prompt response to economic downturns, ultimately contributing to a more resilient economy.
Contractionary fiscal policy is employed by governments to combat rising inflation, which occurs when prices for essentials like clothing and food increase rapidly This surge in prices can lead to higher savings and altered living standards, while also pushing the unemployment rate below its natural level As a result, employers face challenges in finding sufficient workers to meet market demand, ultimately slowing production growth This situation is unsustainable, as it drives up investment costs, and prolonged growth can lead to recession, particularly in the presence of asset bubbles Unfortunately, recessions are an inherent aspect of the business cycle.
Fiscal policy plays a crucial role in fostering long-term growth by addressing the unique needs and circumstances of each country, while considering its administrative capabilities and institutional framework Achieving macroeconomic stability is essential for effective fiscal policy reform, as it lays the groundwork for sustainable development Moreover, adopting a modified strategy that enhances the national budget through targeted public spending proves to be a more sustainable approach, ultimately promoting enduring economic growth.
Scientific research plays a crucial role in shaping the fiscal policy of the United States By providing data-driven insights, it informs government decisions on taxation, spending, and economic growth Understanding the impact of fiscal policy on various sectors helps policymakers create effective strategies that promote stability and development Additionally, ongoing research is essential for adapting fiscal policies to meet the changing economic landscape and addressing challenges such as inequality and unemployment Ultimately, the interplay between scientific research and fiscal policy is vital for fostering a resilient economy.
ANALYZING
General of the United State
The U.S inflation rate rose at the highest rate in more than 6 years in May
In 2018, the U.S Federal Reserve (Fed) faced the challenge of a steady rate increase amidst a low wage-capital development momentum, despite an unemployment rate of 3.8 percent According to the U.S Labor Department's report on June 12, the consumer price index (CPI) rose by 0.2 percent month-over-month and 2.8 percent year-over-year, marking the fastest annual inflation rate since February 2012 Additionally, the core inflation index, which excludes food and energy, also increased by 0.2 percent from the previous month and 2.2 percent compared to May 2017, aligning with economists' expectations The Fed's preferred inflation measure, the Personal Consumption Expenditures (PCE), is targeted at 2 percent, reflecting a marginally lower rate than the CPI reported by the Labor Department.
Some Federal Reserve officials believe that temporary inflation exceeding targets won't necessarily lead to immediate rate hikes, following years of below-target inflation Data from the U.S Department of Commerce, published on May 31, indicated that the Fed's preferred inflation measure increased by 1.8% in April 2018 compared to the previous year Additionally, a report from the U.S Department of Labor on June 12 showed that average hourly wages, adjusted for inflation, remained nearly unchanged year over year in May 2018 Investors anticipate an interest rate increase during the Fed's June 2018 meeting, alongside an updated economic forecast The U.S unemployment rate dropped to 3.8% in May 2018, the lowest in 48 years, suggesting the Fed is nearing full employment These economic indicators reflect significant changes, positioning the United States as a developing country at that time.
From 2018 to 2020, scientific research on the fiscal policy of the United States indicates that changes in the average consumer's income and spending adjustments play a significant role in enhancing real GDP Consequently, government actions, particularly in tax modifications, can directly influence economic production This can be achieved through various methods, including increasing or decreasing marginal tax rates, completely abolishing certain taxes, or amending existing tax laws.
*Expansionary and contractionary of fiscal policy Expansionary fiscal policy:
Consider first the situation in Figure 1, which is like the U.S economy d i h i i h i i f d d ( )
The fiscal policy of the United States plays a crucial role in shaping the country's economic landscape It encompasses government spending, taxation, and budgeting decisions that influence overall economic growth and stability Understanding the implications of these policies is essential for evaluating their impact on various sectors, including employment, inflation, and public services Scientific research is vital in analyzing the effectiveness of fiscal policies, providing data-driven insights that guide policymakers in making informed decisions By examining historical trends and forecasting future outcomes, researchers contribute to a more robust fiscal framework that aims to enhance economic resilience and promote sustainable development.
During a recession, equilibrium (E0) is disrupted, leading to increased unemployment Utilizing a Keynesian economic perspective, which emphasizes short-run macroeconomic policy, expansionary fiscal measures such as tax cuts or increased government spending can effectively shift aggregate demand to AD1, moving it closer to the full-employment output level Consequently, this approach can also elevate the price level back to P1, aligning it with potential GDP.
Figure 1: Expansionary Fiscal Policy (Source: OpenStax College, 2016)
The fiscal policy of the United States plays a crucial role in shaping the nation's economic landscape It encompasses government spending and taxation decisions aimed at influencing economic activity By adjusting fiscal measures, policymakers can stimulate growth during economic downturns or rein in inflation during periods of expansion Understanding the implications of these policies is essential for assessing their impact on employment, consumer confidence, and overall economic stability Through effective fiscal policy, the government seeks to foster a balanced economy that promotes sustainable growth and equitable resource distribution.
The original equilibrium (E0) indicates a recession, with output (Yr) falling below potential GDP An expansionary fiscal policy shifts aggregate demand from AD0 to AD1, allowing the economy to reach a new equilibrium output (E1) at potential GDP Given that the economy was initially underperforming, the resulting inflationary increase in the price level from P0 to P1 is expected to be relatively modest.
Fiscal policy can effectively mitigate an overheating economy by implementing contractionary measures When macroeconomic equilibrium is above potential GDP, as illustrated in Figure 2, the intersection of aggregate demand (AD0) and aggregate supply (AS0) occurs at equilibrium E0 To alleviate upward pressure on price levels, the government can adopt a contractionary fiscal policy that includes federal spending cuts or tax increases This strategy shifts aggregate demand to the left, moving it from AD0 to AD1, and establishes a new equilibrium at potential GDP, represented by E1.
Scientific research plays a crucial role in shaping the fiscal policy of the United States By analyzing economic data and trends, researchers provide valuable insights that inform government decisions on taxation, spending, and budget allocation Understanding the impact of fiscal policy on economic growth and stability is essential for developing effective strategies that promote prosperity The collaboration between scientific research and policymakers ensures that fiscal measures are evidence-based and responsive to the needs of the population Ultimately, informed fiscal policy can drive innovation and enhance the overall economic well-being of the nation.
Figure 2: A Contractionary Fiscal Policy (Source: OpenStax College,
2016) The economy starts at the equilibrium quantity of output Yr, which is above potential GDP The extremely high level of aggregate demand will generate
The fiscal policy of the United States plays a crucial role in managing inflation and stabilizing the economy A contractionary fiscal policy can effectively reduce aggregate demand, shifting it from AD0 to AD1 and resulting in a new equilibrium output at potential GDP, labeled E1 The AD-AS model does not prescribe specific methods for implementing this contractionary policy; options may include spending cuts, tax increases, or a combination of both, depending on the economic context Ultimately, the model emphasizes the necessity of reducing aggregate demand to address inflationary pressures.
2.2 Fiscal policy influences aggregate demand
Aggregate demand (AD) is a key macroeconomic concept that signifies the total demand for goods and services within an economy It is influenced by fiscal policies, particularly through changes in government purchases AD is calculated using the same formula as gross domestic product (GDP), which encompasses consumer spending (C), investment in business capital (I), government expenditure on public goods and services (G), exports (EX), and imports (IM) (Hall, 2019).
A budgeting deficit occurs when there is a discrepancy between budget revenue and current account receivables and expenditures It represents the shortfall in both the tax and capital accounts, arising when government tax costs exceed revenue collections, leading to a budget account shortfall Additionally, if government revenue disbursements surpass capital expenditures, a capital account deficit emerges Typically, the budget deficit is presented as a percentage of GDP.
Scientific research plays a crucial role in shaping the fiscal policy of the United States By analyzing data and trends, researchers provide insights that influence government spending and taxation decisions Understanding the impact of fiscal policy on economic growth and stability is essential for policymakers Moreover, effective fiscal strategies can enhance public services and infrastructure, ultimately benefiting society as a whole Continuous research in this field is necessary to adapt to changing economic conditions and ensure sustainable development.
Scientific research plays a crucial role in shaping the fiscal policy of the United States By analyzing data and trends, researchers provide insights that inform government decisions on taxation and spending Understanding the impact of fiscal policy on economic growth and stability is essential for policymakers Moreover, effective fiscal policy can stimulate innovation and support public goods, ultimately benefiting society as a whole Continuous investment in scientific research is vital for developing evidence-based strategies that enhance the nation's economic resilience.
Figure 3 Graphical system of budget deficit (Source: Policonomics) :
A country's budget deficit reduces the availability of loanable funds, shifting the supply of loanable funds (SLF) to the left This results in an increase in government income but has negative implications, as it lowers gross benefits Consequently, the overall equilibrium quantity of loanable funds decreases, while the real interest rate rises to i1 This increase in the real interest rate leads to a reduction in net capital outflow, thereby decreasing the amount of euros available for foreign currency exchange, which ultimately raises the actual exchange rate.
Fiscal policy of the United State in 2018
In 2018, the US implemented significant fiscal policy changes, including major tax cuts approved at the end of 2017 and an expansion in federal spending authorized by President Trump, amounting to 0.7% of GDP These expansionary measures are expected to boost economic growth in the short term; however, their impact is likely to wane over the following quarters As a result, the effectiveness of monetary policy will increasingly depend on factors such as potential government shutdowns, mandatory budget cuts, and infrastructure investments.
Expansionary fiscal policy is implemented by the government to counteract periods of economic contraction, particularly during recessions, with the aim of stimulating economic growth This approach includes strategies like tax cuts and increased government spending on public works By providing consumers with tax reductions and other benefits, expansionary fiscal policy aims to boost demand and encourage higher spending.
The fiscal policy of the United States plays a crucial role in shaping the nation's economic landscape Through government spending and taxation, it influences overall economic activity, employment rates, and inflation Understanding the implications of fiscal policy is essential for evaluating its impact on both short-term and long-term economic growth Scientific research in this area provides valuable insights into how fiscal measures can effectively stimulate the economy and address challenges such as recessions and unemployment By analyzing historical data and current trends, researchers can offer recommendations for policymakers to enhance economic stability and foster sustainable development.
Expansionary fiscal policy aims to reduce tax rates and boost consumer demand, leading to increased product demand This rise in demand enables companies to hire more workers, ultimately resulting in job growth.
To stimulate the economy and boost employment, the government can invest in public works and benefit programs, such as constructing roads, schools, and parks Following the 2008 financial crisis, the government allocated approximately $831 billion through the 2009 American Recovery and Reinvestment Act, which focused on enhancing infrastructure, offering tax cuts, and increasing spending on health and education to revitalize the economy.
Scientific research plays a crucial role in shaping the fiscal policy of the United States It provides essential data and insights that inform government spending and taxation decisions By analyzing economic trends and societal needs, research helps policymakers create effective fiscal strategies that promote growth and stability Understanding the impact of fiscal policy on various sectors is vital for addressing challenges such as unemployment and inflation Ultimately, the integration of scientific research into fiscal policy formulation enhances the government's ability to make informed decisions that benefit the economy and its citizens.
3.2.2 Impacting of expansionary fiscal policy in USA 2018
A THE TAX CUTS AND JOBS ACT
The Tax Cuts and Jobs Act (TCJA) aims to reform the U.S tax code by simplifying the system, enhancing the competitiveness of corporate taxes, and providing relief for lower and middle-income Americans Key priorities include lowering statutory rates, expanding tax bases, ensuring equitable taxation for households with similar income levels regardless of their income source, and avoiding tax cuts for the wealthy, all while striving to achieve these objectives without increasing the fiscal deficit.
The Act introduces several positive measures aimed at enhancing the tax system, such as reducing personal income tax deductions, lowering marginal tax rates, and creating incentives for private investment Additionally, it addresses base erosion and cross-border benefit changes while minimizing biases related to debt.
The recent tax policy reforms, while necessary, come with significant budgetary costs at a time when the federal budget urgently needs to increase revenue Additionally, the temporary nature of certain laws contributes to considerable confusion and instability within the tax system.
The reduction of the statutory tax rate to align with the OECD average, along with the limitation of specific capital elimination strategies, represents a positive shift that can stimulate investment and mitigate the risks of base erosion and profit shifting.
However, the Act also requires interest deductibility, with a limit as a
The fiscal policy of the United States plays a crucial role in shaping the economy through government spending and taxation This policy aims to influence economic growth, stabilize the economy, and manage inflation By adjusting fiscal measures, the government can respond to economic challenges and promote sustainable development Understanding the implications of fiscal policy is essential for evaluating its impact on various sectors and the overall economic landscape.
The immediate investment of 14 conveys significant advantages while encouraging debt financing However, the cap creates a procyclical distortion, becoming more restrictive as earnings fall, which can heighten pressures and lead to increased bankruptcies in the private sector during downturns Additionally, the temporary expenditure clause disrupts the timing of companies' investment decisions.
The fiscal policy of the United States plays a crucial role in shaping the nation's economic landscape By adjusting government spending and tax policies, fiscal measures aim to influence economic growth, stabilize prices, and reduce unemployment Understanding the implications of these policies is vital for assessing their impact on various sectors and overall economic health Additionally, scientific research contributes to the evaluation and improvement of fiscal strategies, ensuring they are effective and responsive to changing economic conditions.
To enhance company tax competitiveness and reduce investment uncertainty, the U.S should consider adopting a cash flow tax approach, allowing for full investment of capital outlays while eliminating interest expense deductions on new debt Implementing a low, one-time tax on unrepatriated income offers significant advantages to taxpayers opting not to repatriate profits Additionally, early indications suggest that U.S multinationals have significantly increased their share buyback and dividend payout proposals in the wake of tax reform.
Figure 5: Statutory Central Government Corporate Tax Rate (percent)
There are also beneficial benefits to the personal income tax reform That include the reduction of certain itemized deductions, a higher standard deduction
The fiscal policy of the United States has undergone significant changes, including the removal of personal exemptions, caps on state and local tax deductions, and a reduction in the mortgage interest deduction cap In the coming years, most U.S households are expected to benefit from lower income taxes However, these tax policy reforms also include decreases in the alternative minimum tax and a reduction in marginal tax rates for higher-income households, leading to a complex overall impact on the tax landscape.
— provides greater benefits for those in the upper income distribution deciles