The United States Economy: Current State and Outlook

The US economy is yet to recover fully from the effects of the 2008 economic meltdown. Current economic strategies are not only meant to stabilize the economy, but also to safeguard against such eventualities in the future. The ultimate objective of any economy is monetary gain and it is imperative to put in place policies that work towards its realization. However, Miller (2016) posits that monetary policies are just a tip of the iceberg that is the US economy. There are many influencers of the US economy, and technology and globalization contribute many issues and problems shaping it. These issues and problems cannot be discussed exhaustively, but it is critical to illustrate some of them to facilitate understanding of the current trends in the US economy.

The issues and problems in the current US economy also pass as the most popular among stakeholders. The US current economy is heavily reliant on macroeconomic (Miller, 2016), which Summers (2014) observes to have changed dramatically in the last decade. Economic stakeholders are no longer concerned with minor adjustments intended to stabilize specific trends, but increased focus on avoiding secular stagnation. According to Summers (2014), such concerns are outcomes of the long-run effects of short-term developments and failure of monetary policies to address the pressing issues with interest rates at their lower bound. Analysis of macroeconomic issues and problems is imperative to facilitate proposition of solutions with the objective of putting the US economy back on a healthy path. Some of the current economic issues and problems facing the US economy include:

Equal pay

Minimum wage

Corporate Tax

Government spending

Corporate mega mergers

Capital gains tax

Federal Reserve

NAFTA and Trans-Pacific partnerships

China tariffs

Pension reform

Farm subsidies

Property taxes

Bitcoin

Labor unions

Mainstream economic discussions in the US revolve around the above issues. Calls to reexamine the wage structure are informed by arguments advocating raising of minimum wage and payment of the same salary to men and women in the same jobs. The discussions on taxes where some stakeholders advocate for raising taxes on the rich are outcomes of the difference in income. In addition, issues about the need for increasing pension payments for government workers, and transitioning of pension plans for federal, state, and local government into private. These factors have the potential to impact spending power of consumers.

However, the most significant issues and problems affecting the current state of the US economy are those at the federal and corporate levels. There have been calls to cut down on government public spending with the aim to reduce the soaring national debt that has rendered the US economy hostage to emerging economic superpowers. Other national debt related issues include the need for the Federal Reserve to be audited by Congress and capital gain tax, which calls for increase in tax rates for profits earned from stocks, bonds, and real estate. The need to reform property taxes including estate tax is also a challenge to stakeholders. This is important based on understanding that the collapse in the housing market has been cited as the main cause of the 2008 economic recession.

The US engagement in international partnership such as NAFTA and TPP also raises concerns in relation to trade policies. Partnering countries are more likely to benefits from free trade agreements than the US. Consequently, concerns to reform the US foreign trade policies, including the possibility of increasing tariffs on imported products from China is being explored. According to Morrison (2011), the economic integration between China and the US has benefits to both sides, but the trade relationship has become complex in the recent pat due to substantial expansion of ties evidenced by the increase in China-SU trade for $2 billion in 1979 to $457 billion in 2010. The trend is similar with other merging economic superpowers. The opening of markets worldwide due to globalization has also affected the US job industry, leading to calls for tax breaks for individual companies to keep the jobs in the country. The role of labor unions in influencing the US economy has been placed under scrutiny. Emphasis has also been placed on regulation of the US corporate industry. The current debates involve issues such as reduction of increase of tax rate for corporation, especially in the wake of the need to make US firms competitive globally. Prevention of corporate mega mergers has also been advanced as a potential strategy for addressing the risk of large segments of economy being regulated by corporations. The need to support key industries is also a significant challenge with subsidies for farmers being advocated in agriculture, and classification of Bitcoin as a legal currency owing to the emergence of online business platforms that bring the world together through technology.

Trends in the U.S Economy 

Recent data on the outlook of the US economy shows resilience in the past year, despite hurricane-induced disruptions. The GPD surpassed market projections to post a 3% growth after hovering above 2% for the past two years. Data on core retail and car sales illustrated that consumer spending, which is one of the underlying strengths of the economy, remained healthy despite weather disruptions. Significant rebound in job creation, decrease in unemployment that posited a 17-year low, have also been observed. Policies on tax reforms are also being through legislation in both houses. Economic indicators point to the fact that the US economy is healthy. However, the US economy still faces significant challenges that cannot be resolved in the short term.

In this light, it is important to highlight crucial statistics that drive processes of economic decision making for government official, corporations, people, and individuals. The recent statistics posited by The Bureau of Economic Analysis indicate robust growth in the US GDP, climbing from 3.1% in the 2 nd quarter to 3.3% in the third quarter of 2017. Real disposable personal income increased by 0.3%in October 2017. Quarterly industry accounts have illustrated that mining, professional, scientific, technical services, healthcare, and social services were the leading contributors the increase in GDP. Statistics show that 17 of the 22 industry groups analyzed contributed 3.1% growth to GDP.

The US balance of payments from international transactions saw an increase in deficit by $9.6 billion to $123.1 in the 2 nd quarter of 2017. International investment position increased to -$7.9 trillion, while international trade in goods and services were $195.9 billion in exports and $244.6 billion in imports resulting to a deficit of $48.7 billion. In2016, expenditures by foreign direct investors to acquire, establish, and expand business in the US totaled $373.4 billion, a 15% decrease from 2015 FDI. Domestically, 48 stated had increase in real GDP. The GPD growth rate ranged from 8.3% in North Dakota to -0.7% in Iowa. Similar trends were observed in GDP of metropolitan areas. State and local area personal income also increased in all regions, reflecting the growth in personal expenditure on an average of 4.0 in 2016.

The year 2016 saw substantial increases in the US GDP per capita and GDP, reaching a record high in the last five years at $57,436 and $18.7 trillion. However, positive trends were only observed in annual variations exports and retail sales, with domestic demand, demand, consumption, investment, imports, and industrial productions declining from the previous year. Unemployment rate was at 4.9% in 2016, having constantly reduced for the past five years, and is expected to drop further to 4.3 in 2017 as a result of 20.5 jobs being created. Inflation is project to stand at 1.6 in 2017, 1.9 in 2018, and 2.0 in 2019. Manufacturing sector is forecast to grow faster than the economy, with production growing by 3% in 2017. Interest rate was 1.25 earlier and is expected to increase to 1.5 by the end of 2017. Oil and gas prices have also been fluctuating and predictions are largely dependent on the global market trends.

Implications for Small Businesses, Corporations, and Consumers 

The current and subsequent years are projected to be of economic prosperity for the US economic and its citizens as they continue to rid themselves of the remaining effect of the financial crisis. The tax cuts being undertaken for corporations are expected to create more jobs as corporations benefiting from tax policies would compensate through absorption of more workforce to increase production. Consequently, the stock market is expected to undergo irrational exuberance, signaling the peak of a business cycle that is always followed by a recession if appropriate economic strategies are not laid down. For corporations and small businesses, the current economic environment in the US provides opportunities for growth and expansion. However, they are also likely to be victims of the free trade agreements that have reduced the demand of locally produced goods and services and the US seeks to balance its export-import trade. The increase in spending power of consumers is good news for corporations and small businesses.

For ordinary citizens, reduction in employment will play a crucial role in elevating income levels, improving living standards across the board. However, they are also likely to be affected by tax policies such as those targeting the rich if they are put in place. Consumers can best remain relentless in pursuit of career growth and the job market expands, by improving work skills. Those with investments in the stock market must remain calm in instances of pullback. The plummeting commodity prices including oil, gold, and coffee are expected to return to the mean. Therefore, the current US economy presents consumers with an opportunity to for reducing debt, building up savings, and increasing wealth.

Impacts of Diversity on the US Economy 

Diversity, in the context of the US economy, falls under economic and cultural paradigms. For long, economic growth and development has been linked to natural resources, technological developments, and human capital. However, recent evidence is emerging showing that geographic proximity and cultural diversity also play crucial roles. From the economic perspective, it is important to recognize that economic growth and development being witnessed now can be incentivized. Gordon (2012) posits that it is imperative to question the universally accepted perception of the process of economic growth as never ending. The assertions are founded on evidence that no economic growth was observed prior to 1750, hence there is no guarantee that the current trend will continue indefinitely. The diversity in drivers of economic growth and development contributes to such assertions. For instance, the US current economy owes much to globalization and technology, but questions have to be asked about its predicament when developments in the two sectors stagnate. The diversity in influencers of economy call for varied measurement and forecasting frameworks as advocated for by Wieland and Wolters (2011).

Cultural diversity in American cities is a phenomenon that has drawn attention of various stakeholders. The US is billed as a melting pot for its racial and ethnic diversity, which Desmet, Ortuño-Ortín, and Wacziarg (2012) established to be of immense economic significance. The racial and ethnic diversity not only contributes to better prediction of civil conflict and distribution, but also impact growth and provision of public goods that are driven by finer ethnic and racial details. In the US, differences in wages and rental houses prices in metropolitan cities tend to follow cultural dimensions. The implication is that such dimensions and their outcomes influence consumerism, one of the key drivers of the US economy as evidence by statistics on consumer spending power.

Conclusions 

The US current economy is showing positive trends after recovering from the effects of the 2008 financial crisis. The issues and problems identified herein pose challenges to government officials, private stakeholders, and the public. However, strategies such as tax policies have far-reaching implications that can be beneficial or detrimental to the positive progress made by the economy so far. The objective is to create an enabling environment for local corporations and business to thrive, while ensuring economic wellbeing of consumers. Given that consumers are the drivers of the US economy, their protection should be prioritized. This is evident in the numerous debates on the need to transform policies on wages, taxation, and pension, which are intended to give consumers purchasing power. Corporations and small business are major beneficiaries of the whole process because they are the leading employers in the US. Therefore, creating an enabling environment for corporations and small business to thrive will address the perennial problem of unemployment to some extent. However, it is important to understand that while some of the policies will be beneficial to corporations, small business, and consumers, other will be detrimental, especially those intended to raise the US international image through free trade agreements. Such policies may have negative impact on domestic markets and jobs.

References

Bureau of Economic Analysis. (2017). U.S. Economy at a Glance: Perspective from the BEA Accounts. US Department of Commerce. Retrieved 8/12/2017 from: https://www.bea.gov/newsreleases/glance.htm.

Desmet, K., Ortuño-Ortín, I., & Wacziarg, R. (2012). The political economy of linguistic cleavages.  Journal of development Economics ,  97 (2), 322-338.

Gordon, R. J. (2012).  Is US economic growth over? Faltering innovation confronts the six headwinds  (No. w18315). National Bureau of Economic Research.

Miller, R. L. (2016).  Economics today . Pearson/Addison Wesley.

Morrison, W. M. (2011). China-US trade issues.  Current Politics and Economics of Northern and Western Asia ,  20 (3), 409.

Summers, L. H. (2014). US economic prospects: Secular stagnation, hysteresis, and the zero lower bound.  Business Economics ,  49 (2), 65-73.

Wieland, V., & Wolters, M. H. (2011). The diversity of forecasts from macroeconomic models of the US economy.  Economic Theory ,  47 (2), 247-292.