Introduction to US Economy- Historical Review
According to estimation, the economy of US is considered to be the second largest one in the world. But now it seems that the power of the dollar is deteriorating. At the time of Laissez Faire it was considered that modest or low profile government is the best. According to this capitalism the government must be considerate with the harmony of people and the area of economy should be left over to the public and the government should not be concerned with it. This policy raised the economy level of the country. (Laissez- Faire essay, n.d).
In the year 1929 a shocking blow to the economy annihilated any chances of economic success in US and it was considered to be the biggest depression. GDP was weakening, banks were collapsing and unemployment was increasing. The population suffered a lot as the government started to involve more and more in to the economy of the country in contrast with the Laissez Fairre. (The new deal: Changing government involvement in US economy, n.d).
Currently the US has the largest economy in the world and the GDP calculated in 2007 was three times more than the economy of Japan which is the second largest economy of the world. But it has been observed recently that there is a downfall that is being faced by the US economy and the markets are facing a failure. GDP growth in the year 2007 was 2.2% but in 2008 it was just 0.9% which is very less if the past 10 years average is compared and that was 2.8%. (The US economy, 2008).
Current Problems in Economic Crisis
There are many threats that are faced by the people of the US because of the economic crisis faced by the country. For a country like US having a really high GDP rate this crisis is just like facing a disastrous situation. It is not accepted easily as there is an image of US that it is a super power so people do not realize the economic problems there. US is facing a lot of problems due to this crisis. The markets are loosing their values, banks are collapsing and stock markets are also facing a failure. Apart from all these issues; the issues of unemployment, recession, concentration of wealth, debts and housing problems are also increasing day by day. Few of the problems are discussed below:
As it has been discussed earlier that the US GDP is also having a down fall and the recessions are associated with the downfalls. The condition of recession is currently being faced throughout the world and it also has impacts over the United States. US has faced a loss in the GDP rate if it is compared with the past 10 years and due to this loss or downfall it is also facing the issue of recession. Exports to some of the major countries have been coming to a dead slow state which has made the manufacturing plants of US to cease. Obviously when the banks, industries and manufacturing sector is not working as it was working before so the issue of unemployment is also raising its head. (Unemployment and recession, n.d).
Concentration of Wealth
Another problem that has been caused due to the crisis in US is the concentration or inequality of wealth. Almost 40% of the wealth is distributed among the richest people of the country. Great level of inequality can be seen in US. The top level and the richest parties are having half of the wealth and the rest is shared by the average type of people and the low class people are really having nothing for themselves. The US economy has become much more unequal as compare to other countries of the world. (Wolff, 2003).
Credit Card Debt
By default most of the US citizens are facing the credit card debt and this is the reason why the banks of US are trying to prevent themselves from economic disaster because of credit card debt. At the moment the banks of the country are not in a consistent and stable condition because they have suffered with the mortgage crisis in the recent past and have not settled themselves and the issue of credit card debt is also making them to pay billions of dollars just because of unpaid credit cards. Credit cards are now proving themselves to be the new issue that is going through the financial crisis and around $900 billions still have to be paid by the US banks. (Credit card debt programs, n.d)
The US mortgage crisis is perhaps the biggest issue that is being faced due to the financial crises. Even the credit card debt is a smaller problem when it comes to the mortgage problem. This problem is increasing day by day because of the delinquencies of mortgages and foreclosures that are being faced by the US. People are not able to pay the houses and accommodation due to the financial crisis which is obviously a situation to get worried about. (Bajaj, 2008).
Obama’s Economic Plan
President Obama is obviously trying to recover the economic state of the country. Obviously the economic state of America needs to be recovered and it depends on the president that he should take the country in the right direction. Obama has given many relief programs with which he wants to provide relief to the country. HE wants that the wealth should not be a stagnant asset and should be divided among the population of the country equally so that the people of low class can also avail mortgages and essentials of life. Few of the features of his economic policy are described below. These are some of the features that can change the economy of the country if they are applied accordingly.
Tax Relief for Middle Class Americans
For many years it has been observed that the tax cut is only giving benefits to the people who are then facilitated by the luxuries of the life but not to those who need the relief. The people who are not in condition to avail the facilities have no use for the tax cut. So the government of Obama has thought that the taxation should only be applied to the people who are having large sums of money. The tax relief for the middle class families of the US will obviously improve the condition of the low class people over there and it will also solve the problem of concentration of wealth among the richest people of the country. In previous governments the middle class people were working really hard and then they were paying huge amounts of taxes which was really unfair for them. Obama has decided that the middle class people should not pay taxes and should be relieved. (Mojo, 2008).
Economic Stimulus plan creating Americans Jobs
Obama made his presence felt with a historical announcement on the radio to create American jobs. To modernize America, value of manufacturing jobs to the Americans in meeting the current economy is very essential. Obama in his address unfolded the plan to create half a million jobs by investing in biofuels and fuel infrastructure which will not only increase the fuel efficiency but will meet the demand of the country to be economically sound. His plan is to modernize more than 75 percent of the federal buildings and to improve energy efficiency of around two million homes which will help produce more jobs. It will be a huge achievement if President Obama is able to accomplish these tasks concerning trade and manufacturing. In his plans he also disclosed plans to repair America’s infrastructure which includes; roads, bridges and schools. In all President Obama has laid down his foot to boost the economy of America. (Mojo, 2008).
Measures to Strengthen Financial Institutions
In order to strengthen the financial institutions and to overcome the financial crisis President Obama presented a financial system reform which was based on reorganization of financial regulations and supervisory systems. Obama stresses his plan to work in close cooperation with the Congress and the Federal Reserve to strengthen the financial institutions. Also Obama plans to improve the control on financial institutions and markets by integrating them with variety of regulatory and supervisory functions. He also added that, ownership of complex financial instruments in regards to its capital requirement needs to be strengthened and to restore the risk management standards of liquidity. President Obama’s aim is to re strengthen the flow of credit to families and businessmen that is why he disclosed his plans to work with the Federal Reserve and the Congress so that they can start lending for small businesses, auto purchases and municipalities. In addition to this he also asked his treasury department to provide the allocation of funds spent to date and going forward. (Summers, 2009).
Measures to protect Homeownership
President Obama in his economic plan also described how will protect homeownership and will provide them with funds so as to avoid depriving them of their properties. Mr. Obama mentioned that at the time of foreclosures he wants to give the homeowners chance to sell their homes or refinance them by creating a fund. Also waive tax from the owners, provide them with sales assistance and other costs combined with foreclosures and also to provide owners holding mortgaged property worth 10 million who don’t list their items. In all President Obama wants to support the homeowners holding mortgaged property and provide them assistance in all respect so that they can be rest assured that the government is helping them which will attract more homeowners. (Quain, 2008).
If we analyze the economy plan given by President Obama then looking at the present conditions of the economy of the world this plan seems to be difficult to achieve. The tax relief and stimulus packages will be helpful for recovering the economy of the country. The question is how to achieve the economic improvements. Following are some of the positive suggestions given by the economic policy of Obama and if these are followed then the economic conditions can be made better.
President Obama would have to increase the taxes over fuel and oil companies. As we know that these products are getting expensive day by day. The increasing cost of fuel and oil is also a problem for the people because these are greatly used in vehicles, homes and so on so if the oil and fuel companies are paying large taxes over these products then it will definitely provide at least $1000 energy refund. These taxes are known as windfall profit taxes. This step would be definitely a great step towards the achievement of the strong economy of the country. Another kind of fund that can provide leading edge in improving the economic condition of the country is State growth fund which can provide $25 billions. This fund can further be used for the health, accommodation, education and for the taxes over property. Around 150 million people who are working in US will be provided with the Making Work Pay tax credit and for every single person according to an estimate $500 are paid. Such steps will definitely eliminate the problem like concentration of wealth. This step will also eradicate the process of income tax for almost 10 millions of the people in US. Obama also decided to eliminate the process of income tax from the senior people who are making almost $50,000. This act will also save a lot of money approximately $1400. The analysis of Obama’s economy plan proves that if all the plans are applied as decided then obviously it would allow improving the conditions of country’s economy. Hence it can be said that the economic plan of Obama is quite strong and supportive for the economy of the country. It can be analysed that the steps taken by Obama have great potential that will improve the economy of the US. (Mojo, 2008).
Missing Elements from the Economy Plan of President Obama
According to analysts and experts the economy plan misses the social life of the people. It is just thinking over the industrial and professional sector. The social infrastructure made by Obama’s economy plan is very weak. In today’s world, the social framework requires a lot of investment which is missing in this plan and if it would not be repaired then the middle class people of US will not be able to establish themselves. The social infrastructure is also a necessary part of the economy and if this infrastructure is designed properly then it can definitely provide lots and lots of opportunities in job sector as well. The economy policy of Obama is not helping and taking the people of the country along with them rather it is leaving people on their own. In other countries the people are facilitated by the taxes which they pay but in US in addition with taxes there are also many other things for which people have to pay. In the economic plan presented by Obama there were many issues that were discussed like according to him the roads, bridges and other constructive work badly requires to be rebuilt. But he never considered any development regarding the family structure or the framework of the people being together. He gave the strategy for the enhancement of economy of the country and suggested many investments that should be made by the public in order to improve the physical structure of the country like creation of jobs by creating new industries and so on. But obviously the country that is having no social framework will some how lean down at any place and at any day. Hence the social structure of the economy plan should be given extra time and concentration. (Hill, 2009).
Potential Positive Effects of the Plan
There is a thought that the economic plan given by President Obama can is having potential to change the economic situations of the country in positive direction. The steps that have been taken in the policy of Obama have potentials to increase the recovery and reinvestment procedure of the United States. The major potential that is lying in this plan is the potential of reducing the unemployment. This is the first economic plan that has been offered for the betterment of the middle class people. This economic plan has potential to run for the long time in the favor of the people of the country no matter to which class of society they belong to. There are also many steps like developing many new industries which will help in reducing the unemployment level that is rising up now days in United States and can lead to the most serious problem. This policy can extend the job opportunities to the large extent such as 3 to 5 millions.
The optimists believe that the policy of Obama will definitely improve the living standards of the people living in United States that belong to the middle class families. This economy policy has the potential to increase the framework of the nation. Hence all the above factors prove that if all the steps of Obama’s economic policy are implemented properly then definitely it will enhance the economic growth of the United States. (Sprenger, 2009).
It can be concluded by looking at the overall paper that in history when Laissez- Fairre capitalism was being applied in the US then the economy was established because Laissez- Fairre has always believed that the good government is one that only work for the betterment of the people and the economy and the establishment of economy was not the concern of government. Economy was something that was handled by the people of the country. When this type of government was ended then the next governments started to get more involved in to the economic situations of the country which made the economy weakened. The US is considered to be a country whose GDP is very high and the average rate at which the GDP of US tends to increase in the last 10 years was 2.8% but because of the economy disasters around the globe the economy of US has also been disturbed because there are losses to the industrial sector as no major exports are being done. The economic crises have also given raise to many other issues like unemployment, mortgage crises and credit card debts and so on. Now Obama has given a plan that tends to improve the economy of the country. He has given an economic plan that will be applied in the country and he hopes that in future the economic situation will get batter. There will be no concentration of money and the middle class people will also have opportunities to flourish.
Cash Advance Mojo, Obama’s economic plan (2008). Web.
Credit card debt programs (no date) 2009. Web.
Edward Wolff, Wealth and income inequality in USA (2003) Web.
Jacques Sprenger, No 2009 Economic Stimulus Check? Web.
Lawrence Summers, Obama’s economic plan- After Downing Street (2009). Web.
Laissez- Fairre essays (no date) 2009. Web.
Steven Hill, The missing element of Obama’s economic plan (2009) Web.
The new deal: Changing government involvement in the US economy (no date) 2009. Web.
The US economy (2008) Web.
Tony Quain, Politics: Obama’s homeownership policy (2008) Web.
Unemployment and recession (no date) 2009. Web.
Vikas Bijaj, US mortgage crisis spread beyond subprime loans (2008) Web.