StudentShare
Contact Us
Sign In / Sign Up for FREE
Search
Go to advanced search...
Free

Government Spending and Taxation, Lessons from the Great Depression and The Economics of Social Security - Essay Example

Comments (0) Cite this document
Summary
When there is a demand driven economy under which due to any reason the private sector fails to spend, the government needs to come up and provide support to the economy through fiscal measures (Kindleberger…
Download full paperFile format: .doc, available for editing
GRAB THE BEST PAPER92.4% of users find it useful
Government Spending and Taxation, Lessons from the Great Depression and The Economics of Social Security
Read TextPreview

Extract of sample "Government Spending and Taxation, Lessons from the Great Depression and The Economics of Social Security"

The Great Depression Government Spending and Taxation: Lessons from the Great Depression and the Economics of Social Security
The role of government is quite important during economic downturn. When there is a demand driven economy under which due to any reason the private sector fails to spend, the government needs to come up and provide support to the economy through fiscal measures (Kindleberger 1986, pp. 20 – 22)3. The New Deal is considered to be the defining moment during the Great Depression of 1930s and the government spending is viewed as the major step that improved the situation as many economists agree that at the point inadequate government spending led to the Great Depression ((Bordo, Christopher, Charles 2000, pp. 1447- 1448)1. Keynes’s theory advocates that higher government spending and curtailment in taxes could be helpful in counteracting the depression (Kindleberger 1986, p. 24)3.
There is no mutual agreement on the idea of what were the main causes of the Great Depression of the USA. Reviewing its core nature, many believe that the severe contraction in early 1930s and later its slow recovery represent that fiscal policy had a minor role in this phenomena. Thinkers have come to this conclusion through theoretical and empirical studies of that period. Theorists say that even though federal government spending had risen considerably, it was not high enough to have a greater impact on the overall economy (Brown 1956, pp. 860 - 861). On the contrary, few economists believe that fiscal policy played a vital role in the emergence of the Great Depression (McGrattan 2011, p 1)4.
One of the most prominent changes in fiscal policy at that time was a sharp surge in taxes rates on the incomes of individuals which encompass corporate dividends. Hovering taxes is one of the worst measures that government take to overcome crisis which makes the situation even worse. Increasing tax rates leave less money for consumers to spend and hence under this situation Federal Reserve suggests the government to refrain from this approach (Taylor 2002, p. 3).
The Great Depression which left many people out of pocket and discontented, ended up with the idea of social security that called for the government to take up the responsibility of economic security of its citizens. The New Deal provided people with the Social Security system in which employees give their contribution through taxes while they are on job to secure their future in economic term.
The statistics displayed in this particular representative form specifically imply that during the great depression i.e. around 1932 Private sector investments were the lowest hence taxation policies bringing revenue into the country was very small giving a lower annual GDP and in turn resurrecting a crumbling economy.

Table 1. U.S. Tax Rates, 1929–1939
With specific reference to the graphs been plotted there tabulate results are the extension of what and how the taxation policies plus the numerical figures have been determined.
Reference
1. Bordo, Michae D., Christopher J. Erceg, Charles L. Evans. 2000.  Money, Sticky Wages, and the Great Depression.  The American Economic Review. 90(5): 1447-1463.
2. Brown, E. Cary, 1956. Fiscal Policy in the ’Thirties: A Reappraisal. American Economic Review. 46(5): 857–879.
3. Kindleberger, Charles P.  1986.  The World in Depression, 1929-1939.  Berkeley: University of California Press.
4. McGrattan Ellen R., 2011. Capital Taxation During the U.S. Great Depression. Federal Reserve Bank of Minneapolis and University of Minnesota. Minneapolis, Minnesota: Research Department Staff Report.
5. Taylor, Jason E. 2002.  The Output Effects of Government Sponsored Cartels During the New Deal.  The Journal of Industrial Economics. 50(1): 1-10. Read More
Cite this document
  • APA
  • MLA
  • CHICAGO
(“Government Spending and Taxation, Lessons from the Great Depression Essay”, n.d.)
Government Spending and Taxation, Lessons from the Great Depression Essay. Retrieved from https://studentshare.org/macro-microeconomics/1581290-government-spending-and-taxation-lessons-from-the-great-depression-and-the-economics-of-social-security
(Government Spending and Taxation, Lessons from the Great Depression Essay)
Government Spending and Taxation, Lessons from the Great Depression Essay. https://studentshare.org/macro-microeconomics/1581290-government-spending-and-taxation-lessons-from-the-great-depression-and-the-economics-of-social-security.
“Government Spending and Taxation, Lessons from the Great Depression Essay”, n.d. https://studentshare.org/macro-microeconomics/1581290-government-spending-and-taxation-lessons-from-the-great-depression-and-the-economics-of-social-security.
  • Cited: 0 times
Comments (0)
Click to create a comment or rate a document

CHECK THESE SAMPLES OF Government Spending and Taxation, Lessons from the Great Depression and The Economics of Social Security

Government Taxation

Government Taxation Taxes may not be something that citizens enjoy paying. Although they are not in public favor when it comes to increases, they keep the government running and operating on a level that can maintain everyday life. The collecting of these taxes is the one of the best forms of income the government receives. This is so since citizens are taxed on just about everything to do with income. There are three different types of taxes that the government collects on. Income taxes are collected through tax returns like federal or individual states. Sales tax is collected on everyday purchases. Property taxes are collected by home and business owners to pay city governments. Each one of these forms of collections plays a par...
2 Pages(500 words)Essay

US government : campaign spending

...?US Government There are several reasons that it would be extremely difficult to effectively limit campaign spending and some of them shall be explained in this paragraph. The motives behind most political campaigns are to persuade voters and this is done with huge spending. Politicians seeking to be voted for need to travel across different states of the country in order to attract more voters to their candidates and they need to spend much in order to meet their target. The impression that these politicians have are that the more they spend, the more voters they have and in this case, it would be very difficult to effectively limit campaign spending. It is not possible to stop people campaigning to hold their political rallies...
2 Pages(500 words)Dissertation

The Great Depression and Government Response

Despite the fact that the depression had taken its roots in the United States, it rapidly spread to other industrialized countries across the globe and had a devastating effect on output and employment levels. The cultural and social effects of the great depression were also profound, requiring an immediate response from the governments to adopt various expansionary macroeconomic policies. Research proves that in the US, the great depression ranks as the second greatest crisis after the civil war. Regardless of the fact that the causes of the depression still remains controversial, a combination of such factors such as poorly regulated markets, consumer debt and the shortage of high growth industries created a recessionary busine...
6 Pages(1500 words)Research Paper

The Taxation of Social Security

The taxation of the security funds will also vary in a household in some countries, particularly in the US. When couples are having living differently or in the same household, the computation of the taxable security fund is differently calculated (Harding and Gupta, 2007). As this remains, the law also prohibits any taxation that would be advanced to security funds if the persons involved were not having any other supplementary source of income; in such cases, the security funds remain untaxed. From the above information on the taxation of the security, it can be construed that such taxation is highly varied and dependable on many factors that is not only based on the security funds. In this regard, there are several advantages...
5 Pages(1250 words)Essay

GREAT RECESSION/GREAT DEPRESSION

... Macro & Micro Economics 24 November Great Recession/Great Depression Introduction In any business economy, the rate of economic activity depends on periodic fluctuations, which in terms of business, are referred to as the business cycle. The measure of trend of these periodic fluctuations is measured in terms of the levels of employment and production. When the measure indicates a down trend, then it is referred to as recession. This downward trend causes a decline in the spending of households. When handling a recession, one can trace the output to a reduction in purchases of durable goods, machines, and the necessary business equipment. The great depression was a global economic collapse that took place in around 1929 and lasted...
5 Pages(1250 words)Essay

Great Depression

... The Great Depression Introduction From the around the 1930 to the 1940, almost a decade before World War 2, a great economic depression, known as the Great Depression, was experienced. It was the longest, widest, and deepest depression ever of the twentieth century. Although it had its origin in the United States of America, it spread to the other parts of the globe. It began in the month of September 1929 in the US, after a devastating fall in the stock market prices. In the first six months of 1930, government and businesses spent more than they had in the previous six months. The citizens, on the other hand, cut down their expenditure. It then spread to the other parts of the world because of the relationships the US had with other...
5 Pages(1250 words)Essay

Government Taxation

Government Taxation Taxation is the process through which governments collect revenues to finance public budgets. A government, which has no taxation is always unable to provide to the citizens most goods and services (Molly 2009). It is, therefore, very beneficial to comprehend the main types of taxation levied in a country and their advantages and disadvantages. In the United States, there are three main types of taxes which almost every citizen has to pay. The three are income tax, sales tax, and property tax. This paper seeks to discuss the three and make a comparison on how each tax measures up against the criteria for evaluating revenue options.
Income tax Every citizen in the United States is obliged to payin...
2 Pages(500 words)Research Paper

Government Deficit Spending

Government deficit spending affiliation Government deficit spending Over the years, the debt rate in the United States has increased significantly. This debt is generated from the uncontrolled borrowing from the government has increased. In an argument by CBO (2012) the government has spent a lot of borrowed funds to a point that the set aside budget money intended to be borrowed cannot be accounted for. The effects of the large borrowing will be significantly felt in the future. The debt experienced by future generations would be enormous that it would take years to clear the debt as well as create a debt free budget.
For this, the congress has made changes in the way in which government spends to minimize the financial r...
2 Pages(500 words)Research Paper

Great Depression

... families (Freedman, 2005). It indicates the liberties and freedoms that expanded for women because the Great Depression under F.D. Roosevelt’s administration. The New Deal programs were equally a part of government relief initiative because they directly benefited women. For example, the program expanded lower pay scales and enacted legislations that accorded women more power in making economic decisions. Jobs also increased to support more Americans particularly women whose husbands lacked meaningful jobs (Cravens, 2009). Contrastingly, there was legislation under the New Deal that wholly backed white females through reducing cases of job layoffs that usually affected those who in the industries. Overall, women played a fundamental role...
2 Pages(500 words)Essay

Government Spending

Government Spending Question One The Troubled Asset Relief Program (TARP), Bailouts and Quantitative Easing (QE) were used by the US government to revive the economy following the financial crisis. However, the exact figure used through TARP, Bailouts and QE largely remained unknown but according to Nankin and Schmidt (1), the Treasury Department was authorized by Congress to spend $700 billion in addressing the financial crisis. On the other hand, the Treasury Department (1) points out that the collective figure spent on TARP, Bailouts and QE was reduced to $475 billion. However, it is imperative to note that that figure ($700 billion) is strictly what was committed in 2008 to curb the financial crisis since the New York Tines (1...
2 Pages(500 words)Assignment

Introductory Economics and Finance: Why Governments Regulate Firms and Markets

By government regulation, it is meant by the rules administered by a government or government agency to influence any economic activity which determines the price, types, and standards of products, and most importantly the conditions under which the entry and exit of the firms are possible.

Like death, it is impossible to keep away from regulation in about every aspect of daily life. The business regulation may be classified into two- economic and social (Litan). The economic regulation deals with price controls and the entry limits of the firms into markets. The second type regulation mostly deals with externalities (the outside influences of the company or firm which may or may not be decided by them)

Examp...
6 Pages(1500 words)Assignment

Corporate Social Responsibility

Corporate social responsibility refers to the responsibility of an organization that focuses not only on optimum utilization of available resources, but also on ensuring its resources, processes, and products are not causing harm to the society at large, and also try to add greater value. However, the explanation of CSR is not limited to this thought and is perceived differently by different organizations, different groups of population and different regions of the world (Karake-Shalhoub & Karake, 1999).

A holistic understanding why organizations can have such lasting effect on the society may be drawn from Dawe’s (1970; p.214) explanation of sociology that identifies two distinct aspects, sociology of social...
8 Pages(2000 words)Assignment

Using Law for Social Workers

The involvement of social work in society has always said to be highly contested. During recent years it has been seen that there is an unvarying attack on its ethics and values. Managerial controls have been increased a lot in social work and it has affected a lot at all levels of autonomy among social workers. This has bought some sort of crisis in the social work department. “The relationship between law and social work is complex.” (Brayne & carr 1). There are two facts to criticize this. The first one is these social workers are created by the government and are meant for public service and also to regulate various activities. A second obsession is these social workers are always very caring professionals. The...
7 Pages(1750 words)Assignment

Economy and Social Activity of The Broken Hill Community

Soon a retail industry was built up and the community began to grow and is considered to be a society with a civic nature (Learning Communities in Education and Training, 2009). The community of Broken Hill can be considered to be highly diverse with a census that was conducted in the area in 1996 showed that out of the then population there were 961 people who came from overseas and a large amount of those was not from an English speaking nation. The large composition of the population in the community at the time was aboriginals or Torres Strait Islanders. Broken Hill thus shows a varying ethnic community and a diverse mindset considering a large proportion of the people are from nations such as Greece, Malta and even Italy (Lea...
6 Pages(1500 words)Case Study

The Social, Cultural and Political Consequences of Globalization in KSA


Globalization is considered to be the interconnectedness developed by the increased flow of capital, goods, images, people and their ideologies among various nations. It is the result of the free-market policy of the world economy. It is characterized by the introduction of new technologies and considers humanity to be one social community where social and cultural differences do not exist. Philip Cerny has defined the term as a set of economic and political structures which is the outcome of change in characteristics of goods and assets constituting the economy.

Cultural and social globalization denotes the extensive movement of goods, technologies, ideas, images and people around the entire world which has been...
6 Pages(1500 words)Coursework

The Relationship Between Financial Perfprmance and Corporate Social Resposibility on Saudi Electricity Company

The pragmatic parallel mixed methods design was adopted for the study using the questionnaire, structured interview guide and content analysis were the primary instruments utilized in the collection of data. A total of 500 respondents participated in the study. These respondents represented the five sectors considered in the study, namely: the community residents, SEC employees, SEC managers, personnel from other establishments (i.e., the marketplace) and the government.  A combination of sampling techniques was used in this study: stratified random sampling, for the community respondents and SEC employees; simple random sampling, for the respondents of other companies; and purposive sampling for SEC managers and a representa...
88 Pages(22000 words)Case Study

Economic and Social Impact of Globalization

Global corporations are heightening their awareness of the nature of their business relationships with diverse governments considered of primary importance to manage factors influencing their performance. From among the elements that global organizations closely and continuously evaluate, the social and economic impacts are considered of significant importance. As the components and diverse perspectives of globalization affect both the host organizations and those nations they do business with, this research aims to proffer significant social and economic issues that impact global strategies.

The concept of globalization encompasses theories beyond the traditional view that global corporations merely do business abroad....
7 Pages(1750 words)Coursework
sponsored ads
We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.

Let us find you another Essay on topic Government Spending and Taxation, Lessons from the Great Depression and The Economics of Social Security for FREE!

Contact Us