Federal Spending and Bailouts-- what exactly is the issue?
Okay, so I'm studying government and we're currently focusing on domestic policy. It seems to me that one of the most obvious issues right now is the economy: federal spending and bailouts. However, I don't really understand what the whole issue with that is and what people are talking about when they talk about "federal spending." Can anyone clear this up a little?
- Anonymous1 decade agoFavorite Answer
The Federal reserve gives the o.k to the treasury to 'print up more money', or rather, to create more wealth. The fed 'secures it', in other words they 'guarantee it'. But then, we owe the 'federal reserve' money plus interest. This is paid for with our tax money (federal income tax). So, the more money we create, the more we owe to the Fed. Hence, the more taxes we pay. That money owed is called 'the national debt'. Our tax dollars go to pay the interest on that debt.
There is another problem, inflation. Remember, the government does not create wealth, they only print 'dollars', which represent real wealth. So, if the amount of dollars increases, but the real wealth ( goods, capital, etc) stays the same, then the 'dollars' will be worth less, in terms of real goods. I suggest looking up the 'law of marginal utility'.
So, the govt is printing up more dollars to pay for it's expenditures ( promises), but ultimately those dollars are not worth that much. In fact, the more they print, the less each dollar is worth. In time, the market will adjust and demand MORE dollars for the same goods. This is called INFLATION. And it means prices will go up. Most people make a salary that will not adjust to the new worth of money too quickly ( if at all). That means we will all get poorer( higher taxes plus reduced value of the dollar).
That's why we are against new government spending. It costs us.Source(s): I hold a degree in Economics.
- BO#44Lv 61 decade ago
Federal spending is your tax dollars at work. Some uses for them are domestic projects, such as rebuilding roads and bridges, to modernizing schools, libraries, public work projects, things that are going to be useful to Americans and things Americans use on a daily basis. As you studied in history, FDR's "New Deal" was a federal spending project.
- 1 decade ago
Our government keeps giving our wealth to these special interest groups while the Americans who helped to build this country with their blood, sweat, and tears are living in tent cities.
- MarciaLv 61 decade ago
"Federal spending" is the spending of federal dollars, as opposed to state dollars. City, county, state, and federal dollars exist as a result of the collection of dollars through taxes, fees, and fines. In essence, they are dollars provided by the citizens. By definition, dollars provided by the citizens are be used for the benefit of the citizens. Taxation issues were a significant contributor to the American Revolution, development of the American Constitution, and most of our political activities since.
Complementing our "debates" about the collection and spending of tax dollars is our concept of a Free Market System. This is the basic concept behind our economic system; or the way we exchange resources (by now in our history, this is typically done in the form of dollars) for goods and services. Of course, there are just as many debates over just how closely we have followed the basic concept of a Free Market Economic System. In the concept of a Free Market Economic System, only the natural law of Supply and Demand rule how, where, why, when, by whom, and on what resources (such as dollars) are exchanged for other resources such as goods and services. Buyers control what is available for sale through their Demand or actual expenditures. This includes quality, quantity, materials used, processes used, and everything else related to the conversion of raw materials into processed goods, their delivery to market, and prices of the materials at sale time. Sellers respond to what buyers want by Supplying what actually sells; those with unsold, unwanted inventory either respond to the Demand, accept lower profits, or go out of business leaving those businesses behind that can and do Supply the actual Demand.
Over time, most nations have come to accept a number of rules, regulations, and laws "for the benefit of their citizens". Of course, for every action there is a reaction which is where the various debates begin to arise. - Even in groups as small as a nuclear family, there are "rules" which function to benefit the family as a whole whether or not each and every individual really wants to do them or not; things like personal hygiene, chores and family responsibilities, personal interactions and behaviors, bed times, how money is spent, work and school responsibilities, and more. - In the smoother running nations with the least amount of unrest, the rules and laws allow for adequate personal freedom, personal safety, and economic balance for the basic needs of its citizens to be met. As nations, or groups, become more enriched the bar for "basic needs" tends to rise, they tend to expend more resources upon those that cannot provide for themselves (the young, old, in-firmed, etc...), and also address issues that extend beyond day to day survival.
I think it would be safe to say that few nations sucessfully practice a pure Free Market Economic System today, including the United States. A pure Free Market Economic System is pretty much a "buyer beware" and "anything goes" system in the market place. Instead there are a number of laws and regulations designed to protect the citizenery from being sold harmful goods and products, to keep them from being conned out of their money, and to ensure that what is being presented is actually what it appears to be. Most nations have, at least on the books, some sort of building code requirements, labor and safety regulation, traffic laws, and personal interaction/violence laws; all for the safety of their citizens. Most nations have some type of an economic development group/department(s) whose purpose is to develop, monitor, and improve the economic positions of the citizenery and the country, Often developing infrastructure such as roads, providing basic utilities, education, or other items that take a large scale effort and a large number of dollars is seen as benefit to the nation's economy, the citizenery, and a task appropriately belonging to government and the use of citizen supplied government spent dollars.
As a more concrete example, lets take roads. At one time, roads were created when the same path was traveled often enough to keep the trees trimmed and brush down. Improvements to the wagon and buggy ruts was made at the expense and effort of the individual home owner, business owner or business group, and with time local governments. Many of the roads we use today were initially formed by the wagon trail masters and the Pony Express company. Likewise, many of the railroads today were initially partially or fully laid by individual persons who invested their dollars (personal and/or from investor groups) in return for the potential profits to raised by future user fees. Between the 1920's and 1960's, the Feds and most local governments came to realise that inadequate roads was leading to individual communities not being able to move goods they produce out of their area(s) nor the goods they wanted into them. Likewise,