Week 5 assignment 4-Fiscal policy

Within the walls of each country’s political domain there is a mechanism that drives the policy framework, money. The fiscal policy of individual governments helps ensure the policy decisions that are being made. Adolino & Blake state, “Fiscal policy is perhaps the most fundamental macroeconomic policy pursued by governments,” (Adolino & Blake, 2010, pp. 159). Let us focus upon the United States, historically, and within the context of the past decade between 2000-2010. According to Adolino & Blake, “…the United States has a decidedly pluralist fiscal policy process,” (pp. 169). Adolino & Blake continue their analysis by developing the idea that United States fiscal policy not only rests upon Constitutional doctrines, but upon executive-legislative relations (pp. 169). The governmental structure in the United States becomes the machine within which policy formulation and fiscal decisions are developed and produced (pp. 169). Our neighbor to the south, Mexico, is entering its bicentennial anniversary this month and is capitalizing on growth within its fiscal sectors, but amid a revolving crisis of crime at war type levels. According to Angel Gurria, in Supporting Fiscal Policy in Mexico for a Strong and Sustainable Recovery, online at Organisation for Economic Co-Operation and Development , Mexico is following trends that will strengthen its fiscal structures, “Our analysis starts by acknowledging the undeniable progress Mexico has made in terms of expenditure formulation, approval and execution, in line with international practices. Important legislation has been passed since 2006, particularly in the federal budget and fiscal responsibility law (LFPRH) (leading to the balanced budget rule and the 2007 Tax Reform, which focused on ways of strengthening fiscal responsibility and transparency, and, lastly, the 2008 General Fiscal Accounting Law),” (Gurria, 2010). Furthermore, Gurria explains that the fiscal policies of the past have not been successful and amid further crisis new reforms need to be enacted (Gurria, 2010). Finally Gurria states, “This time, in the context of a fragile economic recovery, we hope that all political players are now convinced of the need to provide the Mexican State with sufficient resources to grow and overcome its social deficits,” (Gurria, 2010).

In order to review the fiscal policy of these two countries we must analyze a current similarity and the attention to fiscal policy this issue has received and how much impact it has upon the socioeconomic agenda within the countries. “The inauguration of George W. Bush in January 2001 placed tax cuts firmly on the institutional agenda while fiscal conservatism took a back seat…,” (pp. 171). The bush administration planned to cut taxes and invest in defense, the economic outlooks of the early 2000’s helped to increase spending cutting into the surplus that was in place; now a deficit was evident (pp. 171). More importantly as the war in Iraq and Afghanistan continue to date, there is an impact that has been evident created by the executive-legislative decision making-process in the United States. Adolino & Blake state, “Preliminary estimates for 2008 said that the deficit would exceed 5 percent of the GDP as the country entered a recession,” (pp. 173). With the new administration of Barack Obama and the continual economic problems facing the United States we see how executive-legislative decisions impact the fiscal climate, “Barack Obama’s transition team discussed proposals for an additional spending package designed to reactivate the economy and avoid further financial panic,” (pp. 173). Adolino & Blake further demonstrate how fiscal policy is affected through the relationship between executive order and the legislative process (pp. 173). So where does Mexico compare to the United States? Well, the similarities always exist because, although Mexico and the United States are sovereign states and create solidarity within their governmental structures, the unique framework of the open-market system always joins them and links the countries by a bond to create commonalities, and feasible structures of interdependent relationships; within fiscal policy they mirror each other in execution and investment. Currently, the Mexican crisis lies within the crime and drug wars being played out all across the country, not war per say, but a heavy battle within its own infrastructure, that requires very careful fiscal and social policy attention. As found in the New York Times article, by Enrique Krauze, In Mexico, A War Every Century,

"Today, a handful of powerful criminal groups has unleashed a blood-soaked and utterly illegitimate wave of violence against the Mexican government and Mexican society. This “war,” which rages in too many cities and states of my country, has created a truly Hobbesian situation of human brutality," (Krauze, 2010).

As outlined in article there is a new frontier that faces Mexican diplomacy and fiscal management, that which the country must create economic reforms that instill growth, openness, and design efficient outcomes. Krauze states, “This war, though, will have to be won — and economic growth will have to be revivified — within the rules of democracy,” (Krauze, 2010).

Both countries have futures that will need to captivate new policy designs that address the wars they battle, while actively and efficiently creating a fiscal model that drives governmental relationships and commitments to its constituencies.

Adolino, Jessica R. & Blake, Charles H. (2010). Comparing Public Policies: Issues and Choices in Industrialized Countries. Washington D.C.: CQ Press

Gurria, Angel (January 7, 2010). Supporting Fiscal Policy in Mexico for a Strong and Sustainable Recovery. Organisation for Economic Co-Operation and Development. Retrieved from http://www.oecd.org/document/1/0,3343,en_2649_37405_44362433_1_1_1_1,00.html

Krauze, Enrique (September 14, 2010). In Mexico, a War Every Century. New York Times. Retrieved from: http://www.nytimes.com/2010/09/15/opinion/15krauze.html?_r=1&hp