There is a lot of discussion at the U.S. Capitol about how the federal government has role in helping the economy to recover. Too many people believe that there is absolutely nothing that the government can do to prevent us from falling into a recession. The truth is that government does play a role into how the economy acts. There are a few moves that the United States government can take to help improve the current economic environment.
Short Term Stimulus
The economic stimulus plan of 2009 has given the term stimulus a bad rap. Growth in the United States economy is slowing and the economy needs a shot in the arm. Private sector job growth is anemic and the government could create some jobs by allocating capital responsibly. There has been a single jobs bill or jobs program proposed over the past year. The country is in dire need of investment in many areas that could help to make the United States more competitive with other countries. Infrastructure, education, and engineering would be great fields to invest in that have a positive impact on the United States economy.
Long Term Deficit Reduction
The $14.3 trillion dollar deficit of the United States has hindered the government’s ability to aggressively assist the economy in growing. State and local governments are hurting and could use some federal funds to bridge the gap until the unemployment rate drops. The public sector is needed to fill the gap until the private sector is stronger. Addressing the fiscal issues that the United States government has would help to instill greater confidence from foreign investors. These investors already buy United States Treasuries but could increase their investment in the U.S. if there were no concerns about long term fiscal problems.
Unified Activity
Consumer and investor confidence is really low right now. One of the reasons why confidence is so low is because there is no faith in the ability of governmental leaders to deal with the problems facing the country. The approval rating of Congressional leaders is just 14%. The divided state of Congress even caused S&P to lower the credit rating of the United States for the first time in the country’s history. The deep divide in Congress is now hurting the country. If Congress could do something to cure the bitter atmosphere in Washington then that would go a long way towards increasing confidence.
Pro Growth Initiatives
The United States could adopt policies that would help to encourage domestic production and reduce foreign consumption. China taxes may of our goods exported there at a 25% rate whereas we only tax their products at a 2% rate. This helps them to make their products much cheaper than ours in their own country. We should tax their products at the same rates as ours are taxed so that we consumer more American goods.
Some of these policies may be seen as protectionist but they would decrease our reliance on foreign exports. We could also apply more policies that encourage domestic investment from companies and help to grow U.S. industries. There could also be specific tax breaks given to companies for every employee that is hired.
As you can see the federal government does play a large role in the direction of the economy and can influence it in many ways.
Photo by: dbking
I heard that 70% of the companies that have reported earnings during this season were over and above what analyst had forecast. That’s good news.
I have three friends who have benefited from unemployment compensation. All three hardly looked for a job while receiving benefits. That really upsets me! I think too many Americans are lazy. Yes…I said LAZY! They are working the governmental system hard by receiving unemployment, food stamps and a host of benefits.
Grrr…don’t get me started…
When the economic crunch hit, I had to close a business that I’d had for 16 years. I have since learned a different trade and started a new business. In the mean-time, I cut my living expenses by two thirds.
This is not all on the governments shoulders.
If Americans would get as passionate about finding jobs or creating them as they are about eating, there would be millions of opportunities created. Instead, we sit back… collect unemployment checks and eat bon-bons all day long.
Great points, Jordy. I also know someone who sat around collecting unemployment without looking for a job. The biggest problem with the stimulus is that it went to the banks and just sat there. It has never gotten past Wall Street. That’s what is upsetting the American people so much.
I also think that tariffs should be equalized — I believe in free trade, but it’s unbalanced if one company taxes the imports from another country more greatly than vice versa.
Of course on the other hand you can look at it as we’re getting goods and they’re just getting IOUs.
Government can take action to help the economy recover. It can replace the enormously convoluted and discombobulated tax code, regulatory regime, and it can reduce legal monopolies and local protectionism that favors large companies over small businesses. It can stop manipulating the currency through the central bank and stop punishing savers and transferring wealth from the poor to the rich via the inflation tax.
There is plenty the government can do… they have but to act to help the common people, instead of their fellow buddies in power.