Eco 372 - Fiscal Policy Paper

Fiscal Policy Paper

ECO/372

April 18, 2016

Fiscal Policy Paper

        Federal spending and developing a government budget has been the topic of discussion for the past decade. The United States has been operating under a continuing resolution for the past several years. Government spending has attempted to limit the amount of money allocated for unnecessary programs. However, the topic of discussion becomes what is necessary and what is not required. One of the biggest departments that acquired a significant percent of the federal budget is set aside for military operations. The Department of Defense (DOD) is a major component that needs funding to maintain a strong global presence to maintain its posture. Sub-components of DOD include; the U.S. Navy, U.S. Army, and U.S. Air Force. These three branches that make of the DOD require civilian personnel, military service members, assets, logistics, resources, weapons, and facilities. As a result enhances to technology and weaponry creates a constant effort to dominate over potential adversaries.

        To maintain a global presence and military power requires a balance between what is needed and what is wanted. The former Soviet Union bankrupted Russia because the defense budget took much more than what was necessary. Taxes from a country should be carefully managed to create a surplus and avoid a deficient that can lead to a recession. We will evaluate the U.S. government spending on the DOD to prevent the collapse of the former Soviet Union. Since the last few years, DOD has felt the pressure to tighten the belt on non-essential programs. Moreover, we will also evaluate the macroeconomic effect assessed to contribute or supplement budget proposals.

Fiscal Polices Impacts

The impact the current fiscal policies will have an adverse impact on the United States Economy. In 2016 alone there is expected to be an increase in outlays of roughly six percent, to almost four trillion dollars. Outlays are money spent on something, similar to a budget. The government outlays increasing substantially this year just on Social Security alone, which will increase by a total of twenty-eight billion dollars (The Budget And Economic Outlook: 2016 To 2026, 2016). Without making cuts in the budget elsewhere, there is no designated place for these funds to come from. One way around that problem is to increase the debt ceiling, which is almost never good for the overall economy. The increasing debt will only make returning to a more stable economy that thrives off an increase in GDP that much more challenging. The current fiscal policy is causing more harm to the economy with each passing day.