Monetary and Fiscal Policies - Coursework Example

Monetary and Fiscal Policies Introduction The American government is responsible for the promotion of citizens’ welfare.The government ensures improved welfare for its citizens through creation of employment and maintenance of a steady income in various households. In addition, the governments ensure equitable distribution of the country’s finance resources by creating a favourable environment for business activities (Atkeson, Chari and Kehoe 23). The United States governments create a good business environment through implementation of various policies, which facilitate effective business operations in the country. The role of the United States government however extends beyond the basic responsibilities of promoting business activities in the country. The government is also responsible for enhancing balanced flow of money in the economy to promote the value of the American currency. The government ensures balance cash flow in the economy by maintaining an equitable supply and demand of money in the economy (Braun 32). The government is also responsible for controlling the tax system in the economy to ensure equitable distribution of money in various sectors of the economy. Appropriate taxation system enables the government to ensure a steady flow of income in the economy through maintenance of a steady flow of revenue in the economy. There are various issues, which influence the monetary and fiscal policies in the American economy. These includes factors such as the conflicts in Middle East, participation of the American forces in a crisis in Asia, Medicare reforms, immigration reforms and the most recent midterm elections. This paper examines the 2014 immigration reforms undertaken by president Obama’s government and its impact on the fiscal and monetary policies in the economy. Moreover, the report gives an overview of the monetary and fiscal policies in United States and its effects on the income of the population. The government uses the fiscal policies as well as the monetary policies to ensure the appropriate supply of money in the economy. The policies are enacted by the national bank, which is controlled by congress (Braun 42). Monetary and Fiscal Policies The American government has a responsibility to manage the general pace of activities in the economy such banking and investments. The government can maintain reasonable employment levels and establish stable prices for various products in the country. This management of employment rates and stability of the prices influences the income levels in the economy in addition to ensuring a stable rate of inflation. The government controls various economic aspects through implementation of reliable monetary and fiscal policies. The fiscal policies enable authorities to establish appropriate tax levels in the economy. In addition, the government controls the rate of overall spending through implementation of an appropriate taxation system (Braun 26). The monetary policy, on the other hand, enables the policy makers in the economy to ensure an appropriate money supply in the economy. Most economic activities in the United States entail a continued effort by various governments to establish a reliable relationship between fiscal and monetary policies that promote economic growth. In addition, the government tends to establish effective monetary and fiscal policies, which promotes a steady growth of the economy to prevent instances of depression or recessions. The United States monetary policies are controlled by a group of seven private banks, which have the mandate of ensuring appropriate distribution of money in the economy. The banks are also responsible for ensuring reasonable interest rates on loans and savings in the economy to ensure the supply of money in the economy meets its demands. The banks are managed by monetary policy board, which evaluates the overall performance of the bank. In addition, the chair of the monetary policy board is appointed by the congress, which controls the activities of the board by enacting laws and regulations to govern its operations. The board appoints the managers of the monetary policy banks. The general operations of the banks are independent of the regulations enacted by the congress. However, the policies of the banks regarding the monetary policies in the economy depend on the regulations of the congress and the monetary policy chairperson in New York. The roles of the monetary policy banks entail implementation of strategies, which promotes a steady growth in the economy through reduction in the cost of living and government spending. The banks control the interest rates on investment capital and ensure an equitable distribution of the net income in the country. Monetary policies affect the overall performance of the income because they induce changes in the interest rates and income levels of the population. The policies also determine the level of government spending in the economy. The monetary policies in the United were enacted in the 1930s after the great depression experienced in United States. Presently, the monetary policies enacted by the banks control the overall performance of the economy because they determine the rate and level of local and foreign investments. The policies also control the operations of various financial institutions in the economy in order to promote equitable distribution of interest rates on loans and savings. The banks also ensure that the government spending concurs with the present trends in the world economy. In addition, it enables various organizations operating in America to examine their investment levels to promote a uniform and steady growth of various sectors of the economy. On the other, fiscal policies entail regulations and systems by the government to control taxation in the economy. Fiscal policies enable the government to evaluate the overall revenue of the economy and establish effective spending mechanisms. Fiscal policies enable the authorities to determine the various taxation criteria on products and income of the citizens. In addition, the government controls the overall supply of money in the economy through enactment of appropriate taxation techniques. For example, an increase in the supply of money in the economy ensues to establishment of taxation criterion for reducing the cash flow in order to maintain a balanced economy. The fiscal policies operate in a similar way as the monetary policies in order to promote a steady growth in the economy. The growth of the federal government translates to an increase in government spending. The fiscal policy is developed through an elaborate criterion, which involves the president and the congress. The president has a proposal on the budget to the congress annually. The congress makes various considerations to the budget proposal provided by the president such as the overall spending rate and taxes in the economy. The congress then divides the budget proposals into various categories such as health, national defence, human services and transportation. The congress finally considers the specific appropriations regarding the categories specified and urgency of each appropriation. After the considerations, the congress examines the expenditure plan of the money proposed in the budget. The president accents to the various appropriation bills after they are passed by the congress. The process of enacting the budget bills takes an entire congress session because of its sensibility to the economy. The Federal government gains its main funding from taxes and other government investments. The national reserve also known as Fed reserves provides the government with the relevant funding for implementation of various policies and initiatives in the economy. The fiscal policy, therefore, facilitates the government’s activities such as development of infrastructure, medical care and promotion of education in the society. In addition, fiscal policies enable the government to establish accurate revenue projections. Immigration Reforms Immigration entails movement of people from a particular country of origin to another country. Migration of people in United States occurred during the slave trade era. In addition, most of the Slave masters from Europe settled in America after slavery, which led to the influx from European countries into the United States. Immigration reforms in America started during the revolutionist era where African Americans sort to be recognized by the federal government as an American citizen. The immigration act was enacted back in 1960s to facilitate the recognition of slaves from Africa as legal citizens of the United. Enactment of the immigration laws faced various oppositions from politicians and white civil rights activist. This is the law seen as a mechanism by the federal government to increase poverty and unemployment levels in a country that was facing economic crisis. Immigration reforms entail the process of reforming the immigration act in the American constitution in order to minimize rates of illegal immigration activities in the United States. However, various politicians are against the move citation economic and social implications on the move. Initially, the United States government recognized individuals working or studying legally in United States and failed to recognize immigrants from different parts of the world who were escaping their countries for security purposes (Seidman 27). President Obama declaration of pursuing immigration reforms in the country has raised heated debate among politicians and civil rights authorities in the country. The president highlighted the need to recognize immigrants in the United States in order to reduce cases of illegal immigration activities in the country. The president also cites various national issues such as security as the reasons behind the immigration reforms. The United States government initiatives of enacting legislation that recognize immigrants as part of the American population will facilitate various economic activities such as the provision of labour, investments and increment in government revenue from taxes. Immigration is among the most sensitive issues in the American society recently because of the diversity of the country’s social and economic composition (Atkeson, Chari and Kehoe, 27). In addition, enacting the immigration reforms is seen as an initiative of curving insecurity issues in the society, which results from high levels of illegal immigration into the country. The immigration reforms entail implementation of various changes to the existing immigration policies in the country. The current policies do not recognize immigrants at any level of the economy. According to the regulations, immigrants into the United States should be deported to their respective countries regardless of the situation in their country. The reforms in the immigration policies involve reduction of stiff regulations and abusive handling of the immigrants by various authorities in United States. The reforms promote an open immigration criterion, which facilitates appropriate scrutinizing of the immigrants to United States. This immigration reform provides immigrants with an opportunity to seek employment and establish investments in United States. The immigration reforms in United States entail various aspects such as fixing of border reinforcement, enhancing interior reinforcement, facilitating the use of work permits during the recruitment process. Establishing a visa reviewing committee to ascertain to the visa issuance in regard to changes in economic trends and establishing a program to promote legal migration activities into the country. In addition, the reforms also involve the creation of a program to enable immigrants to adapt to the American lifestyle. There are various benefits and setbacks of the immigration reforms to the American social and economic set up. First, the immigration promotes immigration activities into the country that tends to increase the population of the country. In this case, the increase in population translates to an increase in government to cater for the needs of the additional population. In addition, an increase in population because of immigration leads to a strain on the available resources in the country increases government spending in maintaining and expanding the resources. For example, the government spends more on establishing additional social amenities and infrastructure. The population increase also leads to an increase in government spending on the provision of basic needs to the immigrants’ population such as food and shelter. The government funds the training provided to the immigrants in order to enable them to adjust to the American environment. The immigration reforms impact highly on the economic aspect through an increase in government spending in catering for the needs of the immigrants before they adjust to the new environment (Atkeson, Chari and Kehoe 43). The reforms also legalize migration activities in the country, which promotes insecurity incidences and congestion at the American border. This congestion at various crossing points to America implies that the government will train additional security and human personnel to handle the large number of immigrants at the border. The reforms also affect heavily on American social life. The immigration reforms do not discriminate on the qualifications of immigrants who are recognized legally in American. The lack of a platform to regulate the flow of immigrants to United States results to high unemployment levels in the country with leads to increased criminal activities in various regions in the country. The immigration reforms lead to an increase in the number of people occupying a particular region, which leads to overcrowding in various social places such as sporting avenues. Overcrowding in the social places in the country tends to reduce the number of Americans attending to such events. In addition, an increase in the crime rate in the society creates tension and anxiety that might lead to violent activities. The American society is divided into groups of people with different cultural backgrounds, which creates hatred and anxiety in various social institutions such as schools. Addition of immigrants to the population leads to an increase in tension in the society, which might lead to economic instability in the affected area. Encouraging immigration into American affects the social setup of the immigrants’ countries of origin because of broken families. The reforms lead to tensions between America and the affected countries, which affects America’s international relations (Braun 44). Immigration Reforms and Monetary and Fiscal policies Immigration reforms have various effects on the economic aspect of the United States of America. The economic effects of immigration reforms affect the monetary and fiscal policies of the country. Immigration entails movement of persons from their respective countries into United States (Orrenius and Zavodny 33). The process of immigration affects heavily on the American population. Legal immigration encourages immigration activities on various border points of the United States. The increase of activities at the border ensures that the government should spend heavily on training and recruiting adequate human resources to cater for the congestion at the border. The government spends on recruiting security personnel, sociologists and registration clerks (Atkeson, Chari and Kehoe 36). This recruitment and training process increases the government’s spending which affects the fiscal appropriations of the government. In addition, the government spends heavily on establishing appropriate structures to register and receive immigrants as they move into United States. The immigration reforms indicate that the immigrants should have proper training on adapting to the new environment in the United States. The training process of the immigrants is funded by the federal government, which provides with the appropriate trainers and facilities. The training process also increases government spending on catering for the needs of the immigrants, which is not economically viable. The increase in government spending leads to changes on annual budget allocations to the government. Economics argues that an increase in government in economically unviable activity affects the fiscal policies in various ways. First, there is an increase in the taxation rates on the American’s income. This increase in taxes leads to a reduction in the purchasing power of the Americans, which eventually reduces the overall income of the country. The reduce revenue affects various economically viable government projects such as transportation infrastructure, medical care and education. In addition, an increase in tax rates in the country affects the net income of United States of America citizens, which increases poverty levels in the economy (Schwab and Gearhart 23). An increase in levels of taxations also promotes tension in the society, which might lead to civil war as the Americans try to avenge for the effects of immigrants participation in their economy. Social tension and civil wars in America tends to scare foreign and local investors, which affects the government revenues from the business community. The immigration reforms also provide immigrants with a platform to compete equally with American citizens in the job market. Most immigrants move to United States of America in search well-paying jobs and business opportunities. Majority of the organization capitalize on the high supply for labour in the market, which affects the level of income in the country. The businesses and companies offer immigrant employees lower wages than the normal wages set by the government (Atkeson, Chari and Kehoe 34). These low wages enable the companies to minimize production cost and maximize profits, which is crucial for effective operations of the business. This availability of cheap labour from qualified immigrants leads to a rise in the unemployment level among Native Americans. This unemployment reduces the purchasing power of the Americans, which affects the overall revenue from the American. In addition, the unemployment rates in the economy tension between the affected groups, which eventually affects the economic projections of the United States government. The fiscal policies in United States regulate the taxation systems in the country in order to increase government revenues that are crucial in enhancing development in the country. The fiscal policies should concur with the income levels of the population for effective implementation. The fiscal policies regulate the level of government spending in various activities in the economy in order to promote sustainable development (Schwab and Gearhart 38). The United States fiscal policies ensure that the government prioritizes major development initiatives in the economy. In addition, they ensure that the income of the population balances with the taxation rates in order to reduce inflation rates in the economy. Fiscal policies also regulate government spending on social activities such as registration of the immigrants in order to ensure that more revenue is spent on economically viable activities such as infrastructure development (Orrenius and Zavodny 52). Regardless of the negative short-term effects of immigration reforms on fiscal and monetary policies, the reforms display various positive long-term effects. First, legalization of immigration reduces insecurity cases due to illegal immigration activities. The reduction in insecurity minimizes government spending on enhancing interior security. The revenue is spent on various economically viable projects, which promotes development activities in the country (Atkeson, Chari and Kehoe, 27). In addition, reduction government expenditure reduces taxation rates, which promotes the purchasing power of the citizen. It also facilitates the welfare of the population in terms of good transport facilities, adequate savings, proper housing and reduction in crime rates in the society. The immigrants contribute in the government revenue through purchasing and income tax (Seidman 22). The number of immigrants seeking employment in various organizations in United States organizations promotes productivity, which enhances profitability. A rise in the organizational profits increases government earnings from taxing the profits. In addition, the income of the immigrants is taxed by the government and is used in increasing the revenue of the government. Immigrants with specialized skills facilitate innovation, which is essential for effective economic growth. The immigrants also obtain loans from various lending institutions in the country, which increases the supply of money in the economy. The increase in supply of money in the economy leads to a reduction in the interest rates, which promotes investments, and borrowing in the economy (Seidman 49). Conclusion Monetary policies entail activities by the national bank to have a strict regulation on the supply of money in the economy. These policies enable the government to control interest rates in the economy and enhance the welfare of its citizens. The aim of the monetary policies is to facilitate the creation of employment in the economy in addition to promoting a balanced in the supply of money in the economy. Fiscal policies entail the taxation systems established by the government to promote effective government spending. Immigration policies in United States affect the trends in fiscal and monetary policies in the economy. The reforms affect employment rates, level of government revenues and government spending. Immigration reforms also enhance local investments and promote consumer purchasing power, which increases government earning. Works Cited Atkeson, Andrew, V. V Chari, and Patrick J Kehoe. Sophisticated Monetary Policies. Cambridge, Mass.: National Bureau of Economic Research, 2009. Print. Borio, C. E. V, and Piti Disyatat. Unconventional Monetary Policies. Basel: Bank for International Settlements, Monetary and Economic Dept., 2009. Print. Braun, Dietmar. Fiscal Policies in Federal States. Aldershot, England: Ashgate, 2003. Print. Orrenius, Pia M, and Madeline Zavodny. Beside The Golden Door. Washington, D.C.: AEI Press, 2010. Print. Schwab, William A, and G. David Gearhart. Right To Dream. Fayetteville, Ark. : University of Arkansas Press, 2013. Print. Seidman, Laurence S. Automatic Fiscal Policies To Combat Recessions. Armonk, N.Y.: M.E. Sharpe, 2003. Print. Read More