Learning Team “A” Fiscal Policy Paper

Ronnie Banks, Leona Burleson, Desiree Macias,

Joshua Martinez, Martha Miranda, and Liliana Puentes

ECO/372

February 6th ‘13
Moises Rodriguez

Abstract

The central thesis of this paper is to address the main ideas of how and why the United State’s deficit, surplus and debt have an effect on today’s current events. This paper, will discuss the effects from taxpayer’s, future social security and Medicare users. Also, the unemployed individuals, even our fellow University of Phoenix peers have part in today’s politics. This essay will address the United State’s financial reputation on an international level, a domestic automotive manufacturing, and an Italian clothing company, and the importance behind the Gross Domestic Product (GDP).

Fiscal Policy Economics is a daily issue that concerns personal and business financial activity. The United States is known as one of the strongest financial countries. It is complicated to understand how the United States deficit, surplus, and debt can affect the population economy. The economy can affect different areas and individuals, such as taxpayers, unemployment individuals, GDP, importer and exporter companies, college students, social security and Medicare users. The economic is not affecting only the present but will influence in the future financial activity.
Unemployed individuals A deficit is a loss under payments and surplus is the excess over payments. Debt is equal to deficit minus surpluses. If the government has a surplus on the budge, it means there is money saved that can be used to generate employment. When a deficit is negative, it means that the economic has a very low opportunity to growth. The U.S.’s deficit affects unemployed individuals when a government expense exceeds their available income. In theory, when people spend less, unemployment increases because there is no need of the service the individual can provide. If the economy is growing unemployment rate falls down. Deficit, surpluses, and debt are accounting procedures. To measure how unemployment is affected is better to understand at what point the economy is.
Taxpayers
When the United States is going through a deficit the taxpayer is required to pay more in taxes. Government services such as education, the welfare system, and others are affected by budget cuts, income taxes are increased. When the United States is going through a surplus the taxpayer pays less in taxes. The government is able to pay off budget deficits, lowering the interest rate. The government is also able to spend more money on the defense program, and the education system.
Future Social Security and Medicare users When the United States is going through a deficit any social security surplus is used to help pay off the national debt. Social Security and Medicare are subjected to massive budget cuts. When the United States is going through a surplus the people who receive Social Security and Medicare are guaranteed to have a steady income. People who receive Social Security will receive an increase in pay when there is a surplus.
A domestic automotive manufacturing (exporter) In extension on the effects of today’s current events, automakers both foreign and domestic are exporting more cars from this country than they were five years ago and plan to dramatically expand exports in the next five years (USA Today, 2012). Referencing the article: Auto exports from U.S. on the upswing, by: Patrick Olsen, it explains that ED Kim, director of industry analysis at AutoPacific, stated that it would make sense for Japanese automakers such as Nissan, Honda, and Toyota to develop production in the U.S. “We are a low-cost manufacturing zone at the moment, and that makes building here attractive” (USA Today, 2012). The excess plant capacity, currency exchange rates that effectively lowered U.S. labor costs. Caused a slow car market in the U.S. in the past couple of years, and capacity of plants was barely reached. Quality and free-trade policies have combined to make the U.S. a more attractive place to assemble cars for sale elsewhere (USA Today, 2012).
University of Phoenix student University of phoenix is committed to giving good education, even in financially have been those cities with a massive trade surpluses with the U S. If I have a deficit every month I will keep borrowing and my debt will grow and then at the end I will have to pay more money. When borrowing money there is always and interest rate involved.
The United State’s financial reputation on an international level In the United States we do have very good credit rating. In most and some in high places like are leaders like to say it reputation may have faltered. Than just made a statement that Washington is approaching high levels of political planning and the country with the power to overcome the rest of the world out of crisis and recession. Every day the world changes its up to us to keep up with the change (B., 2012).
Affect on Importer Depending on whether or not a country has a surplus or deficit that is how the exchange rate is affected. If an Italian importer were to trade with the United States when the U. S. was at a surplus then the exchange rate would increase due to the U.S. dollar being of greater value. If the U.S. were at a deficit then the exchange rate would decrease due to the U.S. dollar being of a lesser value. If another countries currency increases then that country will raise the exchange rate with the United States (Chantrill, 2011).
GDP
The U.S. deficit or surplus has a direct affect on GDP. During the Great Depression the GDP went from 4% to 30% due to the federal budget deficit. The current state of the country is said to be closet to the Great Depression than it has ever been. As long as the country stays at such a deficit the GDP will likely follow in the same direction. The fall of the economy has led to loss of jobs, loss of income and therefore loss of economic spending (Deficit as percentage of GDP, 2011).

In conclusion it is important to understand the study of macro and microeconomics, because it effects us as households to the international trade throughout the world. In other sense, it can be describe as currency. Once it is distributed, money goes around in circles and it causes surplus and deficit, and it never ends to a final destination. People deserve to be introduced to this study of economics, in order to make better decisions about one’s bread and butter, or to make profit for a business. This is a unique study that will never get old, because it is constantly changing, and developing new innovative ways to find balance between the influences of surplus, deficits, and how it determines the exchange rate.

References
B, H. F. (2012). Economics. The Virginia Quarterly Review, 88(2), 181-181,VI,VII. Retrieved from http://search.proquest.com/docview/1024447025?accountid=35812 Hoxby, C. M. (2011). Economics of Education.
Chantrill, C. (2012). US Federal Deficit. Retrieved from http://www.usgovernmentspending
Colander, D. C. (2010). Macroeconomics (8th ed.). Boston, MA: McGraw-Hill/Irwin.
Deficit as percentage of GDP. (2011). Retrieved from http://www.washingtonpost.com/wp-dyn/content/graphic/2011/01/27/GR2011012701570.html
Economics Key Table. (2012). Retrieved from http://www.oecd-ilibrary.org/economics/government-deficit_gov-dfct-table-en
USA Today. (2012). Auto exports from U.S. on the upswing. Retrieved from http://usatoday30.usatoday.com/money/autos/story/2012-04-02/honda-usa-plant-anniversary-marysville/53957210/1