Fiscal Policy Paper

Fiscal Policy Paper
Karim Jalil, Alexis Lawson, Christopher Hudson, Delores Jones, Larce Preston
Eco/372
January 26, 2015
Hubertus Puaha

The economy may have numerous financial stages depending on the time. There are times when the economy is confronting a budget deficit, which implies the tax revenues in the government are lower than the government uses. The economy can likewise affect a surplus and high debt, which can likewise empty an economy. The condition of our government can influence individuals from taxpayers, to the elderly who are living on social security, to kids requiring medical and other benefits from the government for their prosperity. The government debt circumstance can be either favorable element to the population by bringing down taxes, or a disservice by making taxes higher.
The effects on tax payers
The Deficit, surplus and debt all play a role in how we get our refund and how many tax breaks the middle class receives; or not. The deficit in a short term is the opposite of "surplus" and is synonymous with shortfall or loss. Debt is an amount of money borrowed by one party from another. Many corporations/individuals use debt as a method for making large purchases that they could not afford under normal circumstances. Often time the government will borrow money from itself producing government debt.
However, before debt effects the taxpayer, it effects the deficit first. “First, the debt actually gives a better indication of the true deficit each year. You can more accurately gauge the deficit by comparing each year's debt to last year's debt. That's because the budget deficit, as reported in each year's budget, does not include the amount owed to the Social Security Trust Fund” (Amadeo, 2015)
Second the interest is added on a debt is added to the deficit each year. And then debt can decrease tax revenue (returns) in the end. According to Kimberly Amadeo, “This would further increase the deficit. As the debt continues to grow, creditors can become concerned about how the U.S. government plans to repay it. Over time, these creditors will expect higher interest payments to provide a greater return for their increased perceived risk. Higher interest costs dampen economic growth.”
The effects on social security
The Social Security System was designed to provide financial help to the elderly and disables, as well as their successors. In regards to U.S. deficits, debt, and surpluses, social security does play an important role. In our textbook it states that a large portion of the government debt is held by the Social Security trust fund, which is held in the form of nonmarketable government bonds. In 2011, the Social Security trust fund owned 18 percent of the United States debt (Colander, D. 2013).
Politicians argue whether or not the Social Security System contributes to a federal deficit and surplus, because technically Social Security can only be paid from the Social Security fund. A surplus can occur when more taxes are collected from current workers than are benefited to retirees. I can only assume the same for a deficit. When there are not enough payroll taxes collected to finance Social Security recipients, the government must compensate for these funds.
The effects on Medicare users
My selection for the Final Policy Paper is, Medicare Uses/Social Security. First I’d like to begin by speaking a bit about “Social Security”.

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