Fiscal Policy
ECON372

Fiscal Policy Fiscal policy is the government’s way of stimulating or slowing down the economy. Actions taken by the government can slow growth if things are moving too fast or stimulate growth if the economy is in a lull. Walmart, a major retailer in the United States, is one of the many organizations that are influenced by fiscal policies. Tax rates and spending can affect the organization’s ability to sell goods and services as well as create jobs for the economy. Based on fiscal policies implemented and economic predictions, there are a few recommendations that can be made to Walmart in order to positively influence the economy and their business. Federal Government Spending
Fiscal policy is changes in government spending and taxes in order to influence the economy in some way. It works by changing the level or composition of aggregate demand (AD). Government spending in the United States has steadily increased from 7% of GDP in 1902 to almost 40% today (Chantrill, 2015). A decent amount of federal spending has gone for health care, education, pensions, and welfare programs.
Defense spending in the United States has fluctuated in the last century, rising from 1% of GDP, peaking at 41% in World War II, declining from 10 percent in the Cold War to five percent today (Chantrill, 2015). Government spending on education has expanded from about one percent of GDP in 1900 to peak at 6 percent in the second decade of the 21st century. Government did not intervene significantly in the provision of health care until the passage of Medicare and Medicaid in the mid-1960s (Boccia, 2015). Since then government health care has increased to around 7 percent of GDP. Deficits fell in 2014 because President Obama and Congress raised taxes on all working Americans, the economy saw some improvement which helped to bring in more revenue, extended unemployment benefits were allowed to expire, and spending cuts from sequestration and spending caps under the Budget Control Act of 2011 took effect (Boccia, 2015).
Impact of Fiscal Policies
The impact of these fiscal policies will have long and short term effects on the U.S. economy. The government’s tax increase on the working class effects how individual households and businesses save money. Tax increases lower the amount of money taxpayers spend, which in the short term lower the demand of supplies. In the long term the lower demand may later decrease the real GDP, therefore lowering prices and encouraging taxpayers to spend and save more money. According to "Congressional Budget Office" (2015), “changes in immigration policies can alter the size and quality of the nation’s labor supply, which are major determinants of both actual and potential output.” In the short term, these laws add more workers to the workforce increasing product output and the number of tax payers. In the long term the increase in tax rates and labor will increase the amount of taxes paid to the government. An increase in taxes paid can later lead to lower interest rates, and ultimately more income, spending, and saving for households. On the other hand, the president’s healthcare laws increase on the GDP has seemed to have a reverse effect on the economy than expected. Instead of making healthcare affordable for all, it has driven up the cost of healthcare for many American families. The long term affects remains to be unseen.
Effects of Fiscal Policies on Walmart Fiscal policy is where the government uses taxes and government spending in order to influence the economy (Weil, 2008). Tax benefits and costs can influence the location of a Walmart location opening which has huge impacts on local economies. Considering retail stores are a major contributor to sales tax income, policies are carefully made in order to encourage retail spending (Burnes, Neumark & White, 2014). Governmental entities keep this in mind when zoning land in cities in order for commercial land to be placed strategically for tax purposes. If a retail store is located within city limits where tax rates are higher, more income is likely to be generated. While small businesses in an area may be threatened by the opening of a Walmart in the area, it has been proven that they are beneficial to the tax base of the area (Vandegrift, Loyer & Kababik, 2011). Research has concluded that opening a Walmart store creates jobs and increases employment in an area. Employee pay is another source of tax income for governmental entities that is able to be used for spending to further stimulate the economy.
Other Macroeconomic Events and Walmart
In 2015 Walmart decided to raise the wages of employees to $10 an hour. Walmart is a large company that employees many people that was making at minimum wage. By raising the wage to $10 for a entry level job and others making up to $15 an hour depending on the skills of the employee. Walmart will have a competitive market for employees to come to work in return this will have an effect on the turnover rate that Walmart has each Quarter. “Walmart is piloting an onboarding and training program that will create clear career paths for associates so they know what is expected of them in order to move from entry level positions to jobs with more responsibility and pay $15 an hour or more.” (Worstall, 2015) Many people fear that if Walmart is going to raise their wage that they pay employees. Would this have an effect on the economy? In return the answer to this is that Walmart has a large profit margin and by raising the pay of the employees will better boost morale. With the self-checkouts that they have in place it will eliminate some jobs as cashiers will not be needed to do these jobs.
Strengths in Economy over Next 2 Years
Over the next few years, the economy is expected to strengthen due to changes in monetary policy (“Economic Research”, 2015). Interest rates, which are currently at a record low, are projected to increase over the next few years to promote stable inflation. There is also economic growth projected which will increase with consumer spending (Conerly, 2015). It is also projected that new housing will also increase due to the population growth, which will also help stimulate the economy with the resulted spending.
With the increased spending from consumers, this in turn would put more funds into the hands of businesses to generate increased spending by businesses as well (Conerly, 2015). This will encourage growth that will in turn create jobs. Job creation is another indicator of a growing economy. These factors all detail the strengths that are projected for the economy over the next few years.
Recommendations for Walmart In 2015 Walmart decided in hopes to shed its reputation and offer better paying jobs and made a recommendation that they would raise their minimum wage pay (Davis & Stafford, 2015). All of the positions at Walmart received an increase in pay and Walmart felt this recommendation was a huge step in the right direction. Recommendation to change the schedule of hours for certain people on the shifts and this also will help balance a work/family environment for many families and also help to keep people working longer at Walmart, and in change boost the economy as well. The changes are expected to send ripples into the low-wage economy, especially among retailers who want to be competitive with or better than Wal-Mart on pay (Davis & Stafford, 2015). They are also thinking about adding some training programs so their employees can work and have the opportunity to education themselves enabling them to work on their future, while also earning income to help boost the economy.
Something else Walmart can do in order to help the economy is to put more money into local businesses by having goods and services manufactured in the United States. This would create jobs in the local market by creating the need for more manufacturing facilities and materials to produce goods. This boost to the GDP would be very beneficial to the economy that is still recovering from the most recent recession.
Conclusion
In sum, fiscal policies are a major factor in the economy. Government control in the economy can stimulate spending which in turn can cause Walmart, as well as other businesses, to further improve the economy with increased jobs, tax income to spend and contribution to GDP. The fiscal policies will help play into the strengths predicted for the economy over the next few years for spending stimulation for consumers as well as businesses.

References
Boccia, R. (2015). Federal spending by the numbers. Retrieved from http://www.heritage.org/research/reports/2014/12/federal-spending-by-the-numbers-2014
Burnes, D., Neumark, D., & White, M. J. (2014). FISCAL ZONING AND SALES TAXES: DO HIGHER SALES TAXES LEAD TO MORE RETAILING AND LESS MANUFACTURING? National Tax Journal, 67(1), 7-50,1. Retrieved from http://search.proquest.com/docview/1500822662?accountid=458
Chantrill, C. (2015). US Government spending history from 1900. Retrieved from http://www.usgovernmentspending.com/past_spending
Conerly, B. (2015). Economic forecash 2015 - 2017. Retrieved from http://www.forbes.com/sites/billconerly/2015/01/06/economic-forecast-2015-2017/
Congressional Budget Office. (2015). Retrieved from https://www.cbo.gov/sites/default/files/114th-congress-2015-2016/reports/50252-Effects_of_ACA_Repeal.pdf
Davis, M & Stafford, D. (2015). Kansas City Star. Retrieved from http://www.kansascity.com/news/business/article10705802.html#storylink=cpy
Economic Research. (2015). Retrieved from http://www.frbsf.org/economic-research/publications/economic-letter/
Vandegrift, D., Loyer, J., & Kababik, D. (2011, May). The effect of Walmart on the tax base: Evidence from New Jersey. , (), . Retrieved from https://mpra.ub.uni-muenchen.de/30937/1/MPRA_paper_30937.pdf
Weil, D. (2008). Fiscal policy. Retrieved from http://www.econlib.org/library/Enc/FiscalPolicy.html
Worstall, T. (2015, Feb. 19). Forbes/ Economics and Finance. Retrieved from http://www.forbes.com/sites/timworstall/2015/02/19/walmart-to-push-wages-to-10-an-hour-macroeconomic-effect-will-be-near-zero/