The American economy has been thriving for a very long time with tremendous growth witnessed in almost all sectors. Indeed the US has witnessed unperturbed and un-interrupted growth since the postcolonial era (Keynes 2006). However, the recession of 2008 exposed the flaws and weaknesses of some of the economic policies being implemented. The unemployment rate went up during the onset of the recession to 5.5% in May 2008 while the GDP fell by 1.8%.In October 2009, the rate of unemployment stood at a staggering 10.2 %-the highest since the great recession of the 1930s (Williams,2013).
The situation has eased and the road to stabilization is on course. Figures from the Bureau of Labor Statistics show that as of August 2013, the US unemployment rate stood at 7.5%.While this is may be seen as an improvement, many people would not share the same sentiments as they feel the pressures occasioned by the poor financial situation. The optimism and expectations once exhibited have been dwindling slowly while being replaced by anger and animosity.
Many analysts and experts in this field have expressed concern of the trickledown effect occasioned by the current rate of unemployment. Continued rise in the rate of unemployment means that the spending capacity of people is lowered, and this in turn decreases the demand in the economy leading an overall negative financial situation. The repercussions of unemployment is far reaching with more young people engaging in criminal activities which again is detrimental to the economy.
The current administration has made strides in recovering the economy with the stimulus package and a host of other economic policies in an effort to curb the state of affairs. However, the government ought to do more by extending the unemployment benefits. Other solutions that should be strongly considered include implementing comprehensive monetary policies by lowering interest rates, having a clear fiscal policy and funding education and healthcare to enable the unemployed access these vital services.
In today’s economy the current consumer income appears to be increasing. In August 2013 the average household in the United States was spending more of their income. This comes as incomes were maintained by wage gains, and all of this is signs that income could be growing in today’s economy. A study shows that American families spent an additional 0.3 % last month than the previous month and higher wages improved incomes up 0.4 %. According to, some analysts this increase could drive more spending in the months to come. The downside to this is that the higher wages and more spending seem to give businesses more reasons to raise prices. This of course, means for the consumer, a little more money in the wallet and everything is more expensive at the grocery store or at restaurants. But this income growth proposes that consumption growth may accelerate in the fourth quarter of this year.
Another, issue is the concern about the future that many families have today. What the future holds in today’s US economy is hard to predict because it is constantly changing and growing or declining. This past summer Americans have seen higher interest rates and have been discouraged about the economy. Today lenders have hiked mortgage and other interest rates sharply. These higher mortgage rates also have slowed down the housing market recovery. Although consumers are worried about the future the Fed is working on policies or improving economic conditions in the near future.
Expansionary fiscal policies are policies that seeks to expand the money supply to encourage economic growth or combat inflation.