Presidents Dilemma Speech free essay sample

Our nation is currently in the middle of grim economic circumstances of stagflation. Inflation is high, and getting higher. Unemployment is high, and getting higher. While all of this happens, GDP continues to drop. If nothing is done about this, our nation is sure to suffer worse consequences than we have already been forced to endure. Our economy will be flushed down the toilet. This new economic policy is the answer to our prayers. With the perfect blend of fiscal and monetary policy, we will achieve our goal of curbing inflation and will reduce the price of goods and services. Although GDP will initially go down because of the decrease in personal income, overtime the reduction in prices will eventually lead to an increase in consumption, which will help to stabilize the economy overtime. Overtime, we will see an increase in GDP and employment rates. This is exactly what we need in this time of economic crisis. The first part of our economic policy is to raise taxes and decrease government spending. We will raise increase the income tax for those making more than $200,000 by 10%, and the income tax on those making between $150,00 and $200,000 annually by 5%. We will also put a $0. 39 tax on cigarettes. The tax on cigarettes will not only increase the government’s revenue; it will also discourage the American people from partaking in such a dangerous habit. We will decrease government spending by getting rid of the US penny. We waste around $120 million per year producing pennies. This will increase government revenue and take some extra money out of the economy, causing prices to fall. This will also cause the government budget to become a surplus. This will decrease the demand for loanable funds, decreasing interest rates. Unfortunately, this will result in a phenomenon known as crowding in. When crowding in occurs, the government borrows less money and as a result, private investment increases. Because private investment increases, the economy will not deflate as much as it was intended to. Monetary policy must be combined with fiscal policy to make sure crowding in does not occur. We will use monetary policy in the second part of our economic policy to negate the effects of crowding in. We will start by decreasing the money supply, which will decrease interest rates. This increase will cancel out the decrease caused by fiscal policy, which will result in interest rates staying about the same. Because the interest rates will stay about the same, the amount of investment will stay the same. This combined economic policy will have no affect on our part in the World Trade Market. Because interest rates stay the same, foreign buyers are not encouraged to increase exports, and domestically, we are not encouraged to import. Because the demand and supply for the American dollar in the foreign market remain unaffected, the value of the US dollar on the international market will be unaffected. Since the amount of imports and exports will remain about the same, our net exports will be unaffected. Because our trading will not be affected, our nation’s balance of trade will also remain unchanged. Unfortunately, this policy will initially result in a fall in GDP. Although investment will stay the same, consumption and government spending will fall. Consumption falls because taxes take money of people’s incomes, discouraging them from buying goods or services. Government spending falls because the government spends less money by cutting back on its spending. Since GDP is the sum of consumption, investment, government spending, and net exports, if consumption and government spending falls GDP will fall. Luckily, this fall in GDP will only be temporary. As the value of the dollar rises, prices fall. When prices fall, people are able to buy more goods for the same amount of money. This will slowly put money back into the economy while inflation remains at safe levels. After hearing all this, you may be wondering how this will provide immediate relief to the problem of unemployment and our decreasing GDP. Unfortunately, this policy alone will not do that. We can however, use the money acquired in the government surplus to bring back New Deal programs such as the Civilian Conservation Corps to help beautify our country, replant trees to reduce our carbon footprint, and most importantly, provide jobs for the people. Using the money acquired through taxation to do this would cause spending to increase, which will cancel out with the previous decrease caused by getting rid of the penny. Providing jobs to the people would cause consumption to increase, negating the decrease caused by taxation. This means that overall, GDP will remain unchanged, unemployment would decrease, and the inflation rate would go down significantly. This method does work, as shown during the years of the Great Depression when then-President Franklin Roosevelt used these programs to get our economy back into shape. The affect this plan would have on our citizens is mostly positive; all citizens would be positively affected by reductions in prices, and the lower class would be positively affected by the increase in jobs, and the eventual stabilization of the economy would, of course, affect everybody positively. Unfortunately, this plan means increase taxes for those who smoke and those who make over $100,000 a year. Citizens, I ask that you please be understanding of this. For the time being, those who are less fortunate than you cannot afford to pay the taxes; they must concentrate their finances on getting their lives back together. Once they get their lives back together, the money will start flowing through the economy again and will return to you. This is a small sacrifice I am asking you to make for the sake of the entire country. As John F. Kennedy said, ask not what your country can do for. Ask what you can do for your country.