Fiscal Policy of the United States Government

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In 2008, the U.S. economy underwent a severe crash that left many wondering about the future heath of the economy, and weather or not it would be brought to its knees, diving into a deep recession/depression. This is where the Federal government stepped in with an $800 billion dollar stimulus program to help lift the U.S economy up, preventing such a catastrophe from happening. When the Federal government steps up in such a way as this, it is called fiscal policy. Fiscal policy involves making alterations in government appropriations and income from taxation in order to “achieve full employment, control inflation, and encourage economic growth” (McConnel, Brue, Flynn). Fiscal policy in the United States really took a turn in the twentieth century with the passing of the Sixteenth Amendment in 1913 witch states “The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration.”(U.S. Const. amend. XVI). This gave the federal government the power to collect income taxes on all americans. Income tax rates started out at a mere 1% for individuals earning over $3,000, and 6% on incomes over $500,000. But by the time of the United States entrance into World War I, the top tax rate was 77% for the richest. And by World War II, the top rate peaked at 94% for the richest Americans. After WWII, rates began a steady decline. In the 1980’s, tax rates rates leveled out to the current income tax rates of 10% as the lowest rate, and almost 40% as the highest rate. There is debate in congress as to the effectiveness of the current tax policies, and weather or not they hurt or help economic growth. Some argue... ... middle of paper ... ...aise the debt ceiling every time the previously passed debt ceiling is reached. If congress does not do this, the treasury runs out of funds to pay for its debt interest payments and other budgeted expenses, running the risk of a government shutdown and default, as seen in late 2013. The debt problem remains a central political debate among campaigning politicians, and should wake up every americans eyes to the risks of out of control debt. Rome didn't fall in a day. All is not wrong in the current economic situation though. Despite the political warfare, the economy has showed signs of growth and unemployment is slowly creeping down, from 9.9% in march of 09’ to 6.7% in march of 14’(Trading Economics). As Americans gain more confidence in the future economic outlook, the economy should pick up even more, returning to the prosperity that all Americans strive for.

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