The goal of this website is to address and evaluate the sustainability of United States Fiscal Policy issues, as well as to provide an example of an international counterpart. Throughout this website we define sustainability as the ability for a program or policy to be on-going and delve into what makes each individual program sustainable on its own. While we each come to our own conclusions with regards to whether or not a program is in fact sustainable, our initial thesis was that fiscal policy in the form of stimulus dollars and growth in aggregate demand spending was not sustainable in the long run.
This website will discuss:
The U.S. government, and its lenders, look for stability in unemployment rates, inflation and GDP growth to start. Fiscal policy, through its use of stimulating either aggregate demand or aggregate supply, are used to help stabilize or improve unemployment, inflation and GDP. Nonetheless, there are costs involved, because as money is spent on these programs, U.S. debt increases when it is not supplemented with tax dollars. For this reason, programs are often hard to sustain because they are politically fueled, often increasing U.S. debt. The balancing of increased revenues to these increased costs is often an on-going challenge within the U.S. government.
The role of fiscal policy has been debated in the United States continuously over the last decade. There are two key theoretical perspectives that have played a crucial role in how the United States government has looked at government investment in the domestic economy.
This website will discuss:
The U.S. government, and its lenders, look for stability in unemployment rates, inflation and GDP growth to start. Fiscal policy, through its use of stimulating either aggregate demand or aggregate supply, are used to help stabilize or improve unemployment, inflation and GDP. Nonetheless, there are costs involved, because as money is spent on these programs, U.S. debt increases when it is not supplemented with tax dollars. For this reason, programs are often hard to sustain because they are politically fueled, often increasing U.S. debt. The balancing of increased revenues to these increased costs is often an on-going challenge within the U.S. government.
The role of fiscal policy has been debated in the United States continuously over the last decade. There are two key theoretical perspectives that have played a crucial role in how the United States government has looked at government investment in the domestic economy.
Keynesian Economics
John Maynard Keynes believed that the role of the government was to ensure full employment. He wrote that the economy was not self-correcting (capable of returning to full employment) and that small interventions such as wage cuts were futile. Instead, he argued for a reduction in long-term interest rates and reform of the existing monetary system to provide greater incentives for the private sector to invest and consume more, which are all aggregate demand (Blinder).
Classical Economics
This school of thought follows from Adam Smith's laissez-faire economic theory, leading to minimal government intervention. However, classical economists recognize the necessity for fiscal policy but focus more on supply-side regulation changes within the government, including decreasing regulation, controlling the money supply, and providing laborers with greater education opportunities (Hoover).
Many political figures view fiscal policy within one of these two theories as mentioned above. Because of this, the sustainability of fiscal policies can often be difficult because it such a political game, wrapped up in heated debate. Our website is not tying itself to one economic theory or another, but merely trying to show the implications of today's fiscal policy on the on-going debate regarding fiscal policy and the role of the government as a whole.
