The current macroeconomics situation in the US

The current macroeconomics situation in the US

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The current macroeconomics situation in the US

The current macroeconomic situation in the United States of America is concerned with the monetary policy, the inflation rates as well as the fiscal situation. Within the year 2012 alone, several events have signaled these problems as well as other unforeseen conditions. The US failed to achieve its job growth expectations, the unemployment rates in the US remained unchanged, and the growth rate slowed down considerably toward the end of the first financial quartile. Unemployment has been a key concern of the Obama regime, and the government has made efforts toward increasing the number of non-farm payroll employees especially in the healthcare and transportation sectors (Diamond & Countryman, 2009 p4).

Of the categories of employees that recorded the highest increase in employment, the civilian labor force was by far the highest. Joblessness forms a major part of most Americans woes and has overtaken the economy as the most pressing situation. The projections also indicated that the situation was not about to change, though the political campaigns were laden with efforts such as the American Jobs Act that sought to use spending and tax cuts to encourage job growth. The NBER had initially denied that the recession of 2007 was occurring until employers retrenched most of their workers, drops occurred in the personal income levels, industrial activity and retail sales in America (Diamond & Countryman, 2009 p2).

The United States of America maintained a budget surplus that was approximately $1.3 billion as compared to a deficit in the previous year (Diamond & Countryman, 2009 p9). The government also increased its expenditure in 2012 by 7.3% (Diamond & Countryman, 2009 p9). Amid these impressive statistics, inflation remained unobserved because of the effect by China that kept prices low as well as its ability to keep its exchange rate pegged to the dollar making their goods affordable. Inflation occurred in the housing and the healthcare sectors. The predictions of increased inflation in the future have also surfaced in light of the attempts by the Federal government to pump money into the economy to prevent the recession.

The current American monetary policy is simple and appropriately standardized to suit the US economic situation. The efforts by the Federal government since 2008 have slowly but effectively fixed the financial mess that engulfed the American economy. The actions of the Federal government have managed to create low nominal and real interest rates across the yield curve. An analysis by Bullard, the Bank of St. Louis President brought out a concern that the current policy might be risky and could result in multiple recessions, higher inflation rates and unemployment typical to those witnessed in the 1970s (Diamond & Countryman, 2009 p5).

Most economic analysis has predicted that even though the government has made significant monetary and fiscal policy efforts, another recession could still occur. In order to ensure this does not happen, the Federal Open Market Committee has to keep the interest rates low to allow defaulters to service their loans. The FOMC should also increase the volumes of printing money and apply the technique of quantitative easing to ensure USA can buy its own bonds in the event that other states cannot purchase them. The short-term financial crisis could be resolved by increasing the government expenditure temporarily into projects having larger public payback as compared to public costs, increasing the unemployment assistance for jobless Americans and promoting private investors (Diamond & Countryman, 2009).

In the long-term, America’s financial policy should strive to derive their revenue increases from base-broadening tax policy changes such as doing away with the deductibility of state and local taxes. Another recommendation would be to minimize the increase of cost of health care and eliminate unproductive government projects that would reduce the growth rate of government expenditure.

References

Diamond. J.W. & Countryman. L. (2009). Economic Policy: Recommendations for the next Administration. James A. Baker III Institute for public policy, Rice University. Retrieved from http://www.bakerinstitute.org/publications/TEPP-pub-ObamaTransitionDiamondCountryman-011209.pdf

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