American Fiscal Policies and Economic Growth Fiscal policy refers to the use of taxation and spending to impact the economy of any country. Specifically, a country's economy relies on major fiscal policy tools that involve government spending in various sectors of the economy and changes in the tax system. Following the changes that the government can make to the two components, for example through the ministries of finance or planning, various macroeconomic variables can be influenced. These include income distribution, aggregate demand and resource allocation. In addition to taxing residents and non-residents, government spending can be financed through various other mechanisms. These include the sale of fixed assets such as land, loans locally or globally, and seigniorage, among others. The three main fiscal policy positions indicated by Hansen 36 include restrictive, neutral and expansionary fiscal policies. Based on the wide range of activities for which the U.S. government spends funds, including security, healthcare, education, and transportation, among others, it must ensure it has effective methods of collecting revenue. This paper will discuss American fiscal policy and economic growth. In its effort to raise annual revenues and effectively provide public goods to its citizens, the U.S. government has implemented effective fiscal policies. Being established at the state and federal levels, the United States government has instituted various taxes through which residents and non-residents are able to contribute to the economic growth of the country. Examples of taxes include capital gains, sales, and income taxes. Even though the government's main source is taxes, federal taxes... middle of paper... have been able to effectively raise high revenues from large numbers of workers. Through regulations such as the Tax Reform Act of 1986, the U.S. government aims to curb tax evasion, which represents a major challenge for many countries. The US economy faces challenges such as high wealth inequality and high defense spending. This has led to the budget running a deficit for some years now. The high revenue that the US government collects every year has led the country to start various industries and research centers which have led to an improvement in the economy. Furthermore, the increase in the number of wealthy individuals has led to the creation of many small businesses that serve as an important source of employment. This has led to an increase in household income creating a strong demand for goods and services produced by the country as well as those imported.