Think About the Role of Government in Controlling the Macroeconomy
The government has control over the macroeconomy because it shapes the economic policy. The government determines macroeconomic issues like its spending and control of currency supply and microeconomic matters aimed at providing public goods and services and uphold a competitive economy (Holcombe, 2006). Holcombe noted that government controls macroeconomy because it collects mandatory taxes to fund the provision of public goods (2006). It is also necessary to note that Congress and the President determine which external factors to deal with and the best way of taxing or subsidizing each activity. It is done to guarantee the quantity of the goods produced and its value mirror the true worth to society.
Briefly Account for the Growth in the U.S. Public Sector
The growth in the public sector has decreased between the mid-2008 and mid-2009 as the United States government invested heavily in military and implemented a new pay scheme and without creating new employment opportunities (Holcombe, 2006). This is because public sector activities are so complex that it is difficult to quantify its expenditures. In addition, the majority of government agencies do not generate profits for their institutions especially those connected to social and military programs (Holcombe, 2006). The decline in growth in the public sector is attributed to the fact that expenditure on goods and services by all ranks of government collective is larger than investment expenditure but much smaller than utilization (Holcombe, 2006).
Explain the Impact of this Growth
Since the public sector growth is negative, its impact is bureaucratic waste. Holcombe says that public sector growth is a function of bureau size maximization (2006). Since the productivity of public sector is negative it requires more funds every year for the productivity. Also budget making is an aspect of fiscal illusion about the relation between cost and benefit. Another impact of negative growth is based on the fact that an invisible tax structure and high tax rate promotes big spending (Holcombe, 2006). Boyes & Melvin (2007) established that “in 2004, total expeditures of federal, state, and local government for goods and services were about $2,184 billion” (pg. 110). In the same year, transfer overheads made by all levels of government were about $1,406 billion (Boyes & Melvin, 2007). This presented a negative growth because total government is much smaller that expenditure for goods and services.
Explain whether you Believe the Growth is Positive or Negative and Why
The growth of the public sector is negative. This is because the basic structure of the public sector implies that budget making favors the delivery of goods, services and money at the expenditure of actual demand for these entities (Boyes & Melvin, 2007). Moreover, the growth is negative because organizations have not viewed their production of value in terms of balanced scorecard (Holcombe, 2006). The main test faced by public sector is getting positive value on all bottom lines concurrently. To achieve positive growth public organizations should be able to generate improved outcomes at lesser costs while improving the service provision (Holcombe, 2006).
Explain How Decisions are Made Regarding Expenditures/Allocation of Resources
The decisions regarding expenditures and allocation of resources in the United States are made by Congressional Budget Office. The office gives Congress the monetary and budgetary breakdown and at the same time provides information and estimates required for the congressional budget process (Holcombe, 2006). This practice enables Congress to have an outline of the Federal budget and to make overall resolutions regarding spending and taxing levels and the shortfall or surplus this level experience. Starling (2008) says that although some states have departments to harmonize their spending, the allotment of resources between the city and the state normally is conducted on a functional basis.
Evaluate Whether or Not Policymakers Make Informed Decisions
The policymakers make informed decisions. This is because their fundamental role under resource allocation is to assist the congressional budget committees with sketching and implementing the yearly budget resolution, which serves as an outline for total levels of government expenditure and incomes in a fiscal year (Starling, 2008). The office also prepares reports that grant budgetary and economic estimations and specify alternative expenditure and income options for lawmakers to consider. The policymakers also follow the progress of spending and revenue legislation (Holcombe, 2006). At the same time, they come up with reports that analyze specific financial policies and their implications to the US economy.