| The Effects of Running a Surplus or Deficit Budget | ECO 372 |

The current state of America’s fiscal policy is of major concern for the majority of the populace with the constantly increase of health care, gas, home interest rates, and staggering unemployment number, some are wondering if this nation will survive. Even many fiscal experts are forecasting that The United States is on road to fiscal disaster which seems to confirm the fears of the nation. Compounding the problems is an elderly populace and increasing deficit problem, a growing segment of government spending apportioned to interest expenditures and entitlements for the upcoming years resulting in plunging government's prolific investments and pushing out private shares.
The deliberation of this paper is centered on how and why the U.S.’s deficit, surplus, and debt influences on the taxpayers, impending social security and Medicare users, the unemployed, University of Phoenix students, America’s financial reputation on a global scale, national (export) automotive manufacturer, Import of Italian clothing company, and gross domestic product (GDP). The near term objectives of the paper to convey information as complete glaze of US fiscal policy and how the current fiscal policy influences the nation.
American taxpayers play a major role in the economy; this is why there is so much commotion about the millions of immigrants who do not pay taxes. The role of a taxpayer and the role of the economy go hand in hand. Many Americans are affected by paying taxes, but deficits can cause tax increases each year, consequently decreasing the amount of money used to support oneself and family. During a surplus, taxes usually decrease allowing the economy to take advantage of the additional capital. The actions the government takes to fight the deficit will determine the future for our grandchildren. The future of the United States depends on how the government uses surplus years to rebuild the social security bank. Without change, the future of America looks very dim when looking at social security benefits, grants, and other federal aid.
The type of budget that the United States runs, directly affects students of any Junior College or four-year university, like University of Phoenix. The amount of federal aid increases when the government runs a surplus budget. Federally funded grants increase in numbers and in the ability to assist increased students. Pale Grants are approved with larger funds, grants have more availability of funds, and more financial aid is given to deserving students. The determining criteria decrease in standards that have to be met when the government budget is in surplus. A budget deficit has adverse effects on the students of universities such as University of Phoenix. Grants are cut, aid is decreased, a criterion is increased, and the number of students assisted decreases when the budget is a deficit. Whether the government budget is running surplus or deficit, students across America are affected along with individuals who are dependent on federal aid to live, such as Social Security and Medicare. Every American that works or has ever worked, understands that there are different types of taxes taken out of paychecks. Social Security and Medicare taxes are taken out to support current Social Security and Medicare users. In the beginning, the amount taken out by taxing not only supported those on social security but also attempted to build a savings cushion for these future funds. When in a deficit, the argument comes up if we should draw back on Social Security and Medicare. During a surplus, the government can provide an increase in benefits if it chooses to, and possibly reduce Social Security and Medicare taxes. Currently, it is forecasted that in 20 years the social security account will run dry and funds will not be available to those in need. Reevaluation of the utilization of these funds is needed for our future to have any money left. When a person becomes separated from his or her job and is able to prove hardship and unrightfully termination, he or she can utilize unemployment benefits until other employment arrangements can be made. Unemployment compensation, paid from funds built from a combination of federal and state taxes and money paid by the previous employer, is a viscous cycle that causes increased tax rates due to increased unemployment rate, which can cause businesses to decrease the number of employees they use or cause the business to fail. Unemployed individuals are unable to contribute to the amount of spending necessary to boost the economy. The amount of unemployment received is used to pay bills not for any frivolous need or want. During a surplus, more individuals are employed, which means there is more money to spend. When there is lower unemployment, there is a higher demand of services and product, which in turn causes businesses to increase their workforce. There is one drawback to a surplus; interest rates may rise to fight the rise of inflation which can cause a halt to businesses expanding and getting loans to improve current assets. During a surplus, the government raises interest rates at a slow and steady rate because too fast and too high an increase can cause a surplus government to fall back into deficit. Along with internal relationships from a surplus of deficit budget, importers also can be affected by the change.
A budget deficit in the U.S. would cause international trade to increase, impacting an Italian clothing company in that the company would likely import more to the U.S. If the U.S. international trade budget was in a surplus, this would mean the U.S. is exporting more than importing. This would likely hurt the Italian clothing company due to decreased amounts of product being exported to the United States. Just as the Italian clothing company is impacted by a deficit or surplus of the budget, so is the Gross Domestic Product (GDP).
GDP is product produced and sold within the United States. When the United States is running a deficit trade budget, the GDP is negatively affected because the amount of product produced and sold within the United States decreases. The GDP could be higher if goods imported were instead produced in the U.S. If the U.S. international trade budget is in surplus, the GDP is significantly higher due to a direct increase in products produced and sold within the United States. Export amounts increase in a surplus budget meaning that other countries are also supporting the U.S. economy. When the United States is in a debt situation, this does not mean that the GDP is negatively affected. Debt can mean that other countries are funding the production of items in the U.S. that increases GDP. Also when GDP increases, the debt can increase because the likelihood of paying off the debt increases as the GDP increases.
The auto industry has gone through a lot of changes these last couple of years. The way that the economy has been they have been suffering from not being at capacity. Due to this they have been exporting more cars than they have in the last five years. Auto makers said that “one way to fill that capacity is to build cars for overseas,” said Ed Kim (Olsen, 2012). With the exchange rate of the Yen being compared to the US it just started to make since that Japanese would ramp up the production out of their US plants. This in turn will not only help them meet capacity in their own plants but will also in turn help the economy of the United States. Throughout the last ten years the United States has seen some true upheaval that has shaken how it is viewed on a global scale as it pertains to financial health. In 2008 we saw the economy decline that spanned many nations. We have immerging markets to contend with. Currently the United States is running high on deficits and this is damaging the global reputation of our country. Our nation is currently focusing on the deficit issue which will again instill trust in the United States. Lastly, one must consider that all nations have a "global credit score;" The United States’ was called in to question a few years back. The United States credit score could have gone from an A+ to an A. This would have had rippling affects across our economy; this score was not down grading and is still viewed as one of the best in the world.
As stated throughout the paper, current fiscal policies influence the individuals within the nation and forces outside the United States. Whether the United States is running a deficit or surplus, or whether the nation is in debt or not influences taxpayers, the social security and Medicare system, importing companies, students of universities like The University of Phoenix, exporting, and the GDP. It is important to understand that each aspect is affected by a deficit or a surplus.

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