American Government Reflections

Chapter 9: Economic Policy

Raising Revenue
The major way that the government creates revenue is through taxes. The government loves
them and the people do not. Most of the revenue created by taxes, about 45 percent, comes from
individual income tax or the the tax that is levied on a person's income. However, each taxpayer
is allowed a standard exemption and deductions are amounts that the government allows the
taxpayers to subtract from their taxable incomes. Other taxes include corporate income tax,
which is based on a corporation's net income, social insurance taxes, which finance social
welfare programs, estate and gift taxes, which tax a dead person's valuable assets and the transfer
of their gifts, excise taxes, which are levied on the consumption of goods and services, and
custom duties, which are levied on imports from foreign countries.the government also raises
money to create revenue for the government. I believe that citizens with higher incomes should
be taxed more and those with lower incomes should have more tax benefits than those with more
money. This would help aid the lower classes and help them provide a more stable financial
foundation for them. Additionally, this would help improve their standard of living.
Influencing the Economy
The American economy is based off of a free-enterprise economy which allows business to be
conducted freely with little government intervention. This can both benefit and harm the
economy of the U.S. The government tries to avoid an economic recession and does this by
through stabilization goals. Full employment and low inflation are two aspects of a stable
economy. To do this the government will use both monetary and fiscal policies. The monetary
policy controls the amount of money in circulation and the fiscal policy deals with government
spending, taxing, and more. Additionally, the Federal Reserve system carefully monitors the
amount of money in circulation through reserve requirements, discount rates, open-market
operations, and bonds. Different viewpoints gave rise to monetarism and Keynesianism. I believe
that the government should intervene in the economy so that the economy remains stable. This
will help steer the economy away from a recession and possible crash. I believe that a freemarket economy will not always create a stable economy and that the government will need to
intervene to help the economy remain stable.
The Federal Budget
The Federal Budget is a fairly new national spending program. Before the early 1900s, the
government had no way to plan on how to spend the revenue it was collecting. In 1921, Congress
passed the Budget and Accounting Act that allowed the Bureau of Budget the power to raise and
lower agencies' spending requests. The Office of Management and Budget was moved to the
executive branch and gave the president more influence over economic policy. Additionally, the
Congressional Budget and Impoundment Control Act of 1974 set ceilings for the budget each
year and limited impoundment. I believe that these acts were necessary as the established a way
to keep track of the revenue that the government was creating and how it is spent. This also helps
distribute the money more evenly and creates more structure for which money is spent. This also
helps comfort people to know that the government knows how it will spend its money and that
they are not being careless with the money that they collect.