Fiscal policy is a crucial economic tool that is used by governments to maximize optimum employment and output levels. Earlier emphasis was laid only on monetary policy to stabilize economic and growth indicators. According to me, a fiscal policy should be used by the economy not only to smooth business cycles but control factors like interest rates that slow economic growth. An expansionary Fiscal policy can reduce government debt and raise employment. The US economy has recently suffered recession, and its Fiscal policy helped it in increasing the aggregate demand and pulled the economy out of the grim situation. The current situation of the economy is more of a recovery one. The recent expansionary fiscal policy has been criticized by some economists as it reduces private spending by a greater percentage than the increase in government spending. The fiscal policy needs to be used more in the US economy today as interest rates are near zero, and there is little risk to private investment. President Obama’s economic strategies to deal with unemployment are lauded by many. The unemployment rate in June 2014 was down to 6.1% and the employment to population ratio is up to 59%. This indicates that people prefer to look for job opportunities and work rather than stay home. About 4.5 million jobs have been created by Obama. The latest budget also aims at increasing the job skills of employees by giving them job driven training. The government is trying to reduce the deficit and stabilize debt by 2015 and reduce it after that. If the government makes investment in the American innovation and manufacturing sector, it can make US an attractive place for investment and job creation. It is possible when America eases its immigration policies.
Bibliography
- Ball, Laurence. DeLong, Brad. Summers, Larry. “Fiscal Policy and Full Employment.” April 2, 2014.
http://www.pathtofullemployment.org/wp-content/uploads/2014/04/delong_summers_ball.pdf
- Tomasky, Micheal.The Daily Beast. “Why You Don’t Know Obama Has Created 4.5 Million Jobs.” (July 7, 2014).
http://www.thedailybeast.com/articles/2014/07/07/why-you-don-t-know-obama-has-created-6-5-million-jobs.html
