Fiscal Policies There Are Many Issues Within Essay

Download this Essay in word format (.doc)

Note: Sample below may appear distorted but all corresponding word document files contain proper formatting

Excerpt from Essay:

Fiscal Policies

There are many issues within the context of federal fiscal policy that are complicated and technical, which is why lay people likely don't fully understand those policies and practices and problems. Those issues are fully flushed out in this paper.

Question ONE (a): Explain the problem of time lags that occur in the enacting and applying fiscal policy. Nadia Macdonald explains in her book (Macroeconomics and Business: an Interactive Approach) that time lags occur because it takes -- in many cases -- a "long time for the government machinery to produce outcomes" (Macdonald, 1999, 141). The government machinery she is referring to is the legislative process (that is, a bill produced by the executive branch or by a member of Congress has to work though committees, through debates, before it is finally acted upon by vote), the "bureaucracy" and the "red tape" that is inevitably involved in new legislation. The time lag can be a year or longer, Macdonald writes.

The very fact that a fiscal policy -- enacted into law when the Congress passes the bill and it is signed into law by the president -- can take up to a year "or more" is a time lag that potentially has a "destabilizing effect rather than a stabilizing one" on the economy and the nation (Macdonald, 141). The author mentions three distinct types of time lags, "recognition lags," "implementation lags," and "response lags."

Recognition lags exist because it takes a certain amount of time for policymakers to actually discern / recognize a "boom" or a "slump" in the economy, Macdonald explains (141). The time it takes to collect data (many fiscal statistics are only available quarterly), and often those data are "only preliminary" so there is a degree of difficulty in fiscal policy managers' ability to interpret the data. Implementation lags result because of the time it takes for the Congress and the White House to agree on a fiscal policy; the bills have to be debated, altered, are re-written to satisfy concerns from all parties. The current standoff in Washington D.C. over the issue of raising the debt limit is a classic example of an "implementation lag" with reference to fiscal policy. The third time lag, response lags, is simply the window of time it takes once a policy has been enacted for the economy to respond to the legislation.

ONE (b): How could politics complicate fiscal policy? And how might expectations of a fiscal policy being temporary weaken the effects of the policy? Washington D.C. is notorious as a place for Democrats and Republicans, liberals and conservatives, to square off in the battle of wills. Quite often, the political climate of Washington D.C. -- which includes members of Congress, the executive branch, the thousands of lobbyists, mainstream media and bloggers from a diversity of persuasions -- is toxic and polarized. That situation has been in full view over the past few months as President Barack Obama tries to negotiate with a divided Congress to reach an agreement over the need to raise the debt ceiling.

Right wing politicians from the House of Representatives (many recently elected thanks to support from the far right wing "Tea Party") are demanding enormous cuts in spending including gutting Medicare and Social Security (and other spending cuts) prior to giving their vote on a debt ceiling. Basically politics in this instance have greatly complicated fiscal policy. The conservatives demand that no new taxes be introduced and that huge cuts be made in popular programs -- some even demanding that the recent health care overhaul legislation be wiped from the books -- or they won't sign on to raising the debt ceiling. In plain language, these ideologically motivated members of Congress are holding the American economy hostage to their unreasonable demands.

As The New York Times editorialized on July 20, when a bipartisan group of six senators offered a reasonable compromise plan to temporarily lift the debt limit -- so the nation won't default and send economic shockwaves through the global economy -- "It makes the House Republicans look even more ridiculous and isolated." This would be a temporary band-aid but it would not weaken the policy if, and it's a big "if," Congress and the…[continue]

Cite This Essay:

"Fiscal Policies There Are Many Issues Within" (2011, July 21) Retrieved December 10, 2016, from

"Fiscal Policies There Are Many Issues Within" 21 July 2011. Web.10 December. 2016. <>

"Fiscal Policies There Are Many Issues Within", 21 July 2011, Accessed.10 December. 2016,

Other Documents Pertaining To This Topic

  • Fiscal Policy of the United States Is

    Fiscal policy of the United States is one of increased spending to help stimulate the economy. A good example of this can be seen with the President's proposal to spend $447 billion on encouraging employers to hire new workers and through government infrastructure projects. While at the same time, it is providing assistance to the states to help hire police officers, fireman and teachers. These different elements are important, because

  • Fiscal Policy Federal Debt and

    Ergo, economic growth through the private sector is not possible without federal deficit. In his own words, "while it is commonly believed that continual budget deficits will bankrupt the nation, in reality, those budget deficits are the only way that our private sector can save and accumulate net financial wealth" (Wray, 2009). 3. The Reformation of Entitlement Programs The article selected to answer the question relative to the future strategies that

  • Fiscal Policy in the Global Environment Case

    Fiscal Policy in the Global Environment: Case Study on Ireland Economic Policy The objective of this work is to examine the key aims of fiscal policy and to determine what the appropriate fiscal policy stance is for the Irish economy at the present. Research questions in this study include those stated as follows: (1) What are the key aims of fiscal policy? (2) What is the appropriate fiscal policy stance for the Irish

  • Fiscal Policy to Manage an

    At a general level, the fiscal policy decreased the individuals' purchasing powers, which subsequently translated into lower levels of consumption. In other words, people bought commodities at higher prices, but they lowered their purchase volumes. The government will probably end up with the same level of federal revenues, but their collection structure will suffer modifications. In other words, the same amount of taxes was once collected through lower taxes and

  • Fiscal and Monetary Issues in America Economics

    Fiscal and Monetary Issues in America Economics There are high tensions in the American economy today resulting from speculations whether the government will be able to hit the debt ceiling. Failure to hit the debt ceiling has serious economic effects to many sectors of the economy both in the United States and various countries of the world. Political disagreements regarding the budget delay decision-making process as the date ceiling draws closer

  • Issues in Project Management

    Project management is a systematic methodology of attaining aims and objectives in a given criteria for instance time and budget spread on number of years. Project management has been behind every major project for instance man landing on the moon to polio campaigns throughout a country (Gray CR and Larson, 2008). The subject of project management has grown and blossomed over a number of years. It dates back to cavemen. The

  • Policies Discuss the Way Fiscal

    In turn, low consumption leads to low level of economic growth, but also to low inflation. Gross Domestic Product is also distorted by taxation, as every integrant component - consumption, investment, savings and net foreign position are deeply influenced, directly or indirectly, by level of taxes. A liberal fiscal policy, with lower taxes, encourages individuals and companies to develop and register important economic growth rates, but induces an increasing

Read Full Essay
Copyright 2016 . All Rights Reserved