Comparison Between Bush and Obama Economic Periods

Fiscal policy, that is how government determines levels of taxation and spending, is at the core of any discussion of tax cuts. Therefore, consideration must be given to levels of government spending, given their considerable impact on the economy.

Higher levels of government spending have been historically demonstrated to inhibit economic growth, particularly, when such spending is in the form of entitlements and other transfer payments (Sowell 2004). Even government spending, as a consumer of goods and services, has secondary effects that diminish the beneficial impact of said spending (Gwartney, et al. p. 30), but an examination of the economic impact of government discretionary spending is beyond the scope of this paper.

It is, however, helpful to contrast the economic impact of entitlement spending by the U.S. government with that of European governments. The current budgetary outlays of the federal government, measured as a share of national economic output, consume almost 21 % of gross domestic product (GDP) (Office of Management and Budget). According to figures provided by the Organization for Economic Cooperation and Development (OECD), Gov¬ernment spending consumes more than 50 % of GDP in France and Sweden and more than 45 % in Germany and Italy (). These figures are relevant to comparisons of U.S. economic performance to that of the European Union (E.U.).

When government spends, it is draws from treasury receipts – the majority of which is from collected taxes, or it must go into debt, typically by issuing bonds, to fund its expenditures. Thus, the government is presented with the choices of maintaining a balanced budget or issuing debt. Each of these alternatives has consequences that we will briefly examine...

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