Fiscal Policy-Manipulates the total amount of government revenue and spending so as to manage overall demand in the economy. Can result in budget deficit or budget surplus (Katznelson, 294).
Monetary Policy-Attempts to fine-tune the economy by manipulating interest rates, the cost of money (Katznelson, 302).
Discretionary Spending- Under the jurisdiction of the House and Senate Appropriations Committees, which provide authority for federal agencies to incur obligations and make payments out of the treasury for specified purpose. Example: defense spending, highway maintenance, grants and loans for higher education (Katznelson, 303).
Mandatory Spending-Governed by formulas or criteria set forth in authorizing legislation, passed by Congress, rather than by appropriations. These programs are the result of previous commitments that Congress is obligated to meet (Katznelson, 301).
I think that the process of developing fiscal policy that provides services and sustainability should focus more on mandatory spending and less on discretionary spending. (The other type of economic policy is monetary policy). For example, the United States should put much less emphasis on military spending--it consumes a whopping one-half of all discretionary spending (Katznelson, 303)!! I think that reducing that number to maybe a fifth of discretionary spending would be a good goal, because putting that much money into defense, besides being unnecessary, is not sustainable. If a country were to spend left over discretionary funds at all, they should be put back into stimulating that country's economy.
Sources:
"Barack Obama Calls For More Defense Spending than Republicans | SwiftEconomics.com."SwiftEconomics.com. N.p., n.d. Web. 17 Apr. 2011. <http://www.swifteconomics.com/2011/02/20/obama-calls-for-more-defense-spending-than-republicans/>.
Katznelson, Ira, Mark Kesselman, and Alan Draper. The politics of power: a critical introduction to Americna government. 6th ed. New York: W. W. Norton & Co.,2011. 2-12. Print.
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