Evolution of Fiscal Policy in United States

According to Wiel (2005), fiscal policy is the way by which a government uses its spending and taxation to impact economy. The fiscal policies vary from year to year according to how the government draws its policy. In United States', fiscal policy has been evolving over time up to its current status. Over the last century, fiscal policy of United States' has been progressing. This transformation is as a result of different ways the government of United States' has allocated its spending over the years. The government has also experienced a significant growth in the amount of revenue collected. This is because the United States' has incorporated different better ways of implementing fiscal policies across the years. Over the last 100 years, the ways in which U.S government used to raise revenue has drastically changed.

Chantrill (2011) shows that at the start of 20th century, revenue systems in the United States' included collection of disparate excises, duties, charges and ad-valorem taxes. The United States' government revenue at the time stood at 7% of GDP. Between years 1933 to 1938 the revenue collected increased significantly at the nadir of Great Depression. The rates then dropped again due to recession and then United States' revenue rose abruptly again in year 1945 during World War II. During the post-world war II United States' revenue fell down initially. It then began to rise gradually with peaks during recession years of 1982 and 2001 and reduced more drastically in the recession year 2008.

Chantrill (2011), argue that government spending has over the years experienced a steady growth with sharps peaks during the 1st and 2nd world war. According to Keynesian economics, government spending failed to affect anything after there were massive interventions during the two periods of 1930s and 2007 - 2009. In general, the United States' economy has maintained stable GDP growth rate for the past century. Better ideologies have also been incorporated throughout the century in developing fiscal policies resulting to a evolution of the same.