Fiscal Policy Essay

Fiscal Policy The people of the United States are by the fiscal policies. Team C will address the how and why the U. S. budget deficits, budget surpluses, and debt affect different individuals and institutions. There is a wide array of individuals affected by fiscal policy, which include tax payers, future Social Security and Medicaid users. The unemployed individuals and University of Phoenix students will be affected by fiscal policy. The U. S. financial reputation, an exporter, and importer, and affects of the GDP will also be covered about the affects of the U.

S. fiscal policy. Effects on Tax Payers The U. S. budget deficits can affect tax payers in a negative aspect by increased taxes to offset the deficit. The budget deficit does impose interest costs on tax payers, meaning that the national savings totals are lower and this decreases the amount of private investing (Ackerman, 2004). This higher interest cost will have a direct effect on the trade deficit which will cause Americans to become even more dependent on exports for their consumer needs. The U. S. udget surpluses would affect tax payers in a positive aspect by refunding tax payers on overpayments. Another benefit from a surplus is that it will stimulate investing by offering lower interest rates, which would increase tax payers savings when filing taxes (Hall, 2012). The U. S. budget debt affects the tax payers. The U. S. government cannot sustain the economic level of owing more than they are receiving. The other option for shortening the debt is to limit spending by reducing benefits and programs.

The interest rates may rise because of a decrease in the purchase of Treasury bonds from foreign investors (NDT, 2012). Effects on future Social Security and Medicare user The United States Budget Deficit is only going to hurt the future Social Security and Medicare Users. Overspending will lead to no money in these accounts. The retirement age will continue to go up as long as there is no money to support the aging Americans. The Budget Surplus however would help Social Security and Medicare users as money increased and the deficit decreased.

Effects on Unemployed Individuals The deficits affect unemployed individuals directly as the higher the deficit, the higher the unemployment. The reverse is also true, by lowering the deficit and investing in programs that will stimulate growth, the unemployed individuals are more likely to find work and contribute to paying off the deficit (Ginsburg, 2009). The U. S. budget surplus would positively affect unemployed individuals because this would allocate more funds to be used in further economic development, such as increasing the support to infrastructure improvements.

This increase in the allocation of funds to support an infrastructure improvement would lower unemployment, which would increase expansion (Hall, 2012). The U. S. budget debt affects unemployed people directly but the government has set up debt management programs to assist the unemployed people on getting back on the correct financial track. The Department of Education offers an income-based repayment option to assist unemployed individuals in repaying their student loans (Worksham,2012). Effects on University of Phoenix Students University of Phoenix students affected by budget deficits, budget surpluses, and debt.

Congress takes money from student loan programs and redistribute for other purposes (Nelson, 2011). Earlier this year President Obama disclosed the proposed budget for the year and the area that will be affected is the Federal Pell Grant Program (Quinn II, 2011). A budget surplus would enable the students to continue receiving help from the government. Effects on the United States’ financial reputation on an international level The United States is experiencing fiscal challenging because of outstanding debts owed to other countries.

The U. S. is borrowing and selling off assets to these countries that cause more debt. To reduce the debt with these countries the U. S. need to run small budget surpluses, and this can be accomplished by cutting spending and increasing the revenue (Huntley, 2010). Effects on Domestic Automotive Manufacturing (exporter) When expansionary policies are used the result is improvement because an increase in available cash. This results in a net decrease in exports because it is more profitable to sell cars domestically than to export them.

The severity of the recession and resulting contraction of the economy however has forced American car manufacturers to increase their comparative advantage resulting in improved competitiveness in current and growing automotive markets, such as China and India (Colander, 2010). A budget surplus occurs when there are more funds coming into the government than going out. A healthy economy operating at its potential output will result in increases in individual income (Colander, 2010). However, an economy producing at its optimal output will result in the governments implementing contractionary fiscal policies to fight inflation.

As less cash becomes available, consumers will tend to purchase imports and domestic car manufacturers will export more cars. As the economy contracts domestic manufacturers will increase their comparative advantage to compete internationally (Colander, 2010). Currently there are initiatives for fiscal policy to reduce the debt. Less government spending in a recession could have a detrimental effect on the United States’ current economic recovery, including the health of automotive manufacturers, thus more incentive for domestic manufacturers to export cars.

For the short-term domestic car sales may suffer increasing the incentive for international sales in growing markets. The long-term effects would mean less taxes and higher profits for car companies tomorrow (Colander, 2010). Effects on an Italian Clothing Company (Importer) Expansionary polices, such as those incorporated into an economy during a recession, have positive effects for imports. Increasing the money supply will increase an American consumer’s option to purchase more foreign goods, such as Italian clothing (Colander, 2010).

Contractionary policies, such as those that may occur in an economy operating at its productive capacity will have a negative effect on the purchase or Italian clothing. Levels of trade with foreign countries will decrease from the peak productive period. Initiatives to pay-down the United States debt could have a negative effect on the economy, thus reducing the demand for Italian clothing. However, if efforts to lower the debt are successful there will be less tax burden on consumers leading to more opportunities for foreign trade. Effects on GDP

The United States Deficit affects the GDP when the deficit causes companies to move their business oversees. The surplus could be used to help support the United States companies that operate within the United States. The United States debt and deficit affects individuals and the future of Federal Government programs. These programs could be student loans to Medicare. The Government cannot spend trillions of dollars they do not have and still function the way American needs to function. In conclusion, as team c demonstrated, a wide array of individuals and institutions are affected by the budget deficits, budget surpluses, and debt.

Business managers need to have a good understanding of economics to make the best decision for the company. The business managers need to know how the fiscal policy will affect their business. A business managers must know how the debt, deficits, and surpluses are calculated. The business manager will also need to know what percentage of the GCP the debt, deficits, or surpluses make up. References Ackerman, S. (Nov/Dec 2004). The Budget Deficits Bigger Brother. Retrieved from:www. fair. org/index. php? page=3562 Colander, D. C. (2010). Macroeconomics (8th ed. ).

Boston, MA: McGraw-Hill/Irwin. Ginsburg, H. (2009) National Jobs for All Coalition: Increasing Unemployment Increases the Deficit. Reducing Unemployment Reduces the Deficit. Retrieved from url:www. njfac. org/us1. htm Hall, S. (2012) How does the government surplus affect the economy? Retrieved from url: www. ehow. com/about_6193482_government-budget-surplus-affect-economy_. html Huntley, J. (2010). Federal Debt and the Risk of a Financial Crisis. Retrieved from http://www. cbo. gov/publication/25094 NDT (2012) No Debt Today: How the National Debt Affects You.

Retrieved from url: www. nodebttoday. com/how-national-debt-affects-you. php Nelson, L. A. (2011). Inside Higher ED. Retrieved from http://www. insidehighered. com/news/2011/07/18/increased_student_loan_interest_rates_to_reduce_deficit_and_probably_not_expand_grants Quinn II, C. (2011), THE FAMUAN. Retrieved fromhttp://www. thefamuanonline. com/news/obama-s-budget-cuts-college-student-grants-1. 2478105 Worksham, R. (2012) Government Debt Relief Programs for the Unemployed. Retrieved from iurl:www. ehow. com/list_7330593_government-debt-relief-prgorams-unemployed. html