Economic Problems and Solutions in the US - Essay Example

The United States, like other nations, faces economic challenges that require a comprehensive approach to long-term solutions. Unresolved unemployment rates and budget deficits are examples of indicators of economic problems and the federal government should rise to the task and ensure necessary policy initiatives toward saving the economic stake of American taxpayers. One of the identified root causes of economic problems is the decline in profit margin from entrepreneurial ventures. Even though this has been a long-term problem, no solution has been found and the consequences continue to spread through high unemployment rates and low wage rates. Earlier strategies to solve the problem through an expansionary approach through macroeconomic factors such as fiscal and monetary policies for example reduced unemployment rates but at the same time caused inflation. ‘Contractionary’ measures however resolved inflation but increases unemployment rates. Consequently, a comprehensive approach to resolving the profit rate dilemma, and sustaining the already achieved rate, should be explored. This is because the adopted strategies by the private sector to improve their profit rates have adversely affected citizens through imposed low wage rates, lost jobs, and increased work input at no extra consideration. The government should therefore initiate specific employee protection policies to ensure that employers do not overexploit employees in their profit rate maximization. Such policies would include stipulation and strict implementation of minimum wages and working conditions (Mosley, 1).

The role that the housing crisis played in worsening the American economy also means that measures should be taken through the interdependence of the arms of the federal government to ensure higher accountability of the Federal Reserve in the formulation and implementation of its fiscal and monetary policies. This is because the Federal Reserve or the other arms should have foreseen and prevented the housing crisis. Exercising presidential veto powers to recall unsound or risky policies, by federal agencies is a possible solution (Mosley, 3-9).

The two problems, the private sector’s move to increase their profit rate and government agencies’ weak approach to detecting and preventing economic crises, can also be resolved by increasing the government’s direct role in the economy. This is because the American economic problems are factors of the capitalistic system that allows capitalists to dictate resource distribution. Nationalizing the economy will however empower the government to manage and control resources and resource allocation in the citizens’ economic interest. The approach will for example ensure effective protection of employees’ interests instead of profit maximization. Similarly, significant direct involvement in economic sectors such as the banking sector will allow for responsibility among other players in the sector because any initiated crisis will not dictate a government bailout. This is because current private sector domination means that failure by the government to bail out players, during a crisis, would mean a collapse of the sector. Significant government participation in product delivery would however sustain an affected sector and instigate responsibility among private players (Mosley, 11).

Another identifiable problem of the United States economy that requires an urgent solution is the level of economic dependence on other countries. While the nation internally depends on capitalists, some of whom are foreigners to run its economy, the nation’s overreliance on imports is evident through its balance of trade deficit. The indicator shows that the United States not only relies on imports but that the value of its total imports outweighs the value of its total exports. This exposes the economy to unfavorable global conditions. It is further a potential economic threat that may adversely affect the economy, especially dependence on imports from politics. Uncontrolled import levels also adversely affect employment rates and wage rates. The federal government should therefore review its international trade policies, and internal policies affecting production costs to promote domestic production and reasonably restrict imports (Heffner, 1).

The United States economy faces macroeconomic problems such as the private sector’s profit maximization interest, overdependence on the private sector to run the economy, and overreliance on imports. A move to ensure significant direct government participation in the economy improved domestic production, and a controlled quantity of imports promises improvements to the economy.