Question

Monetary policy is managed by the Fed, or the central bank of the United States. Fiscal policy is managed by Congress, which votes on new taxes and government programs. Fiscal policy is hotly debated as to whether it is an effective means for stabilizing the economy. Many economists hold that it worsens the economy by increasing national debt and stripping purchasing power.

To complete the Discussion activity, write a post that answers the following questions:

• Find two articles by respected economists: one in support of fiscal policy and another that does not support it.
• Write a discussion post that addresses the following:
  • Summarize each article.
  • How would you use fiscal policy to make the citizens of the United States better off?
  • What would be the costs of your solution? Explain.

Answer 1

Fiscal Policy refers to the use of the Government machinery to generate its revenue from the citizens , mostly in the from of taxes, to pursue its objective of all national growth and development. In simple words, the policy that determines the Governments methods in which it will collect its revenue in the form of taxes is referred to as the fiscal policy of the Government. There have been many economists who have vehemently objected to any such kind of policy by the Government, whereas there also have been many noted economists who have come in the support of this policy.

Friedrich Hayek, not notable economist, was vehemently against the imposing of such a kind of policy on the people. According to Hayek, such policies such as the fiscal policy cripples the financial capability not only of the people from whom the tax or money is being collected, but also of the Government, as it received all the taxation money, which then go totally un-utilized and is being looted. Hayek stated that such kind of money collected from the poor people was no way the means of building a strong nation. The imposition of such a kind of tax brings down the capability of the poor people, further, it the poor who constitute the largest section of the society, and hence they are the ones who had to bear the burden of such a policy. Hayes instead wanted the capitalistic form of market to be more prevalent in the economy. Hayek believed that it is the richest people in an economy that actually decide the step to be taken by a Government. He was in favor of the capitalists taking care of the development and growth of the country in place of the government.

John Maynard Keynes, perhaps one of the highly regarded economists, however, was of a view which was totally contrasting against any such capitalistic market. Keynes always stressed on the overall growth of the larger section of the society and believed that a Government is created in order to ensure that the all-round growth and development of the society takes place. It is the Government’s responsibility to figure out the best way it can carry out the development activities, and how it can maximize the resources at its disposal to ensure the a=maximum development for its citizens. Keynes also was believed to have stressed that the Government cannot function on its own, if the people of an economy are not by its side. It is also the responsibility of the people to contribute to the development of the society. Therefore, If a well-accepted policy where there are all consideration to collect a fair revenue from the people against the services they enjoy in a society is for the greater good of the society.

The Fiscal policy is an efficient tool at the disposal of the Government to ensure that the economy stays functioning, Fiscal, policy can be utilized to ensure that the infrastructure of the country is always maintained. It is at the end of the day, the infrastructure, through which the other development take place. Good roads, railways, communication networks, etc. are the basic needs of the society. Once these infrastructure issues are done with, the Government should focus on the social development of the deprived section of the society. Many social security schemes can be undertaken to ensure that the poorest section of the society can also get their survival. The Government also must push for the services sector in the economy to flourish. This will ensure tat there are enough jobs in the market to employ the citizens. This will further ensure that the development index of the society will gradually go up. The Government also has to ensure that the security of the nation is not compromised and therefore, the armed forces of the country must be given more power to safeguard the nation from any external threat.

  The fiscal policy of the Government is all dependent on the contribution of the citizens and hence there is no extra cost of the implementation of the programs which will be carried out with the revenue generated through the fiscal measure. However, it could cost the country’s government and the people heavily, if the implementation of the executed measure with the money, is not properly carried out. The Government must ensure that there are no hiccups and hurdles in the execution so that there is no loss of the public money.