Introduction
The US economy grew at the end of 2021 despite the emergence of a new strain of the Omicron virus. Overachieving analysts’ predictions, the US GDP expanded 6.9 percent year over year in the fourth quarter (Akbulaev et al., 2020). According to economists from The Wall Street Journal, the fourth quarter’s GDP growth will be 5.5 percent (Akbulaev et al., 2020). GDP grew 2.3 percent slower in the third quarter (Fernandes, 2020).
All three major U.S. stock indices fell sharply, recording the most significant decline in June 2020 during the COVID-19 pandemic (Akbulaev et al., 2020). Eleven significant sectors of the S&P 500 Index ended the session deeply depressed. At next week’s Fed meeting, financial markets expect interest rate hikes of at least 75 basis points (Hoek et al., 2020). There are worries that a protracted period of the Fed’s tightening policies may bring the economy dangerously close to a recession.
The US stock market is one of the world’s biggest and most liquid marketplaces. It is a mechanism that enables investors to purchase and sell securities from businesses whose shares are traded on the stock market. Since trading occurs in the US stock market in real-time, investors may react swiftly to price fluctuations (Harjoto et al., 2020). Changes in the US stock market can significantly impact the global economy. The US stock market offers investors the chance to make significant returns with the proper investment strategy and is a significant source of cash for businesses.
The Distribution of Income or Poverty
The widening disparity between the affluent and low-income people in the United States has exposed and worsened existing socioeconomic inequities, putting the lower strata in an adamant position. May 2019 Gini coefficient in the US reached 0.482, exceeding the international “safety line” of 0.4 (Fernandes, 2020). Since the outbreak of COVID-19, economic inequality in American society has become increasingly acute due to the ineffective actions of the US government.
Since the “exorbitant” cost of COVID-19 treatment, it has become expensive for them. Mid-level positions have decreased due to unbridled competition and hostile takeovers (Akbulaev et al., 2020). Low-income individuals can no longer afford housing due to rising housing costs. Expensive and inefficient healthcare services have worsened the health status of less economically fortunate Americans (Akbulaev et al., 2020). High university tuition fees have virtually taken away the right to higher education from low-income people.
State of Massachusetts
The financial sector, high-tech, knowledge-intensive sectors, the development of information technology, the healthcare sector, and higher education all underpin the Massachusetts economy. Massachusetts’s annual per capita income surpasses $50,000; the Bay State is the third-highest income state in the United States (Krieger et al., 2020). Furthermore, the cumulative GDP and non-farm employment are other economic variables highlighting the area’s state. Specifically, the state is 17th in the country based on cumulative GDP between 2011 and 2021 and 18th based on non-farm employment (Massachusetts – State Economic Profile, 2023). The state’s major commercial hubs are in Boston, the capital of Massachusetts, and Cambridge and Springfield.
Oil Prices
Falling energy costs explain the surprisingly robust economic growth in the US and Europe this year. According to S&P Global business surveys, which indicate future development, supply chain managers on both sides of the Atlantic are more optimistic than in recent months (Lee et al., 2023). Gains for individuals, companies, and governments also balance off rising borrowing costs as central banks increase interest rates to curb historically high inflation.
Another variable to be considered is how consumers are ready to spend and invest their financial resources. High consumer spending often reflects people’s increased willingness to spend money and confidence in their ability to maintain their financial security (Möser, 2020). However, several variables can negatively impact consumer spending, such as deteriorating economic circumstances, growing unemployment, rising prices, or unpredictability in the job market.
The Trade Deficit
In 2022, the US trade deficit increased by 12.2% yearly to $948.1 billion. The Wall Street Journal (WSJ) published this using information from the US Department of Commerce. The US Department of Commerce reports that the balance deficit for December was $67.4 billion (Akbulaev et al., 2020). Furthermore, the source indicates that rising consumer and vehicle demand improved imports.
Employment and Unemployment
Demand for labor in interest-rate-sensitive sectors such as housing and retail has declined, but airlines and restaurants, on the other hand, need help finding enough workers. Rapid job growth could put pressure on the Federal Reserve and lead to its third straight 75-basis-point interest rate hike in September, although much will depend on the pace of inflation (DeLong, 2023). With 10.7 million jobs in the US at the end of June 2022 and 1.8 jobs for every unemployed person, the labor market remains strong, and economists do not expect a sharp slowdown in wage growth this year (Morales & Reding, 2021). However, while the national wages are relatively high globally, corporations operate in more affordable places. This is why offshoring efforts are implemented.
Inflation and the CPI
It is essential to highlight that the amount Americans send for goods and services has fluctuated rather negatively. The US consumer price index rose 6.4% year on year in January, slower than expected (Lundh, 2023). The said phenomenon could lead to a stricter decision by the Federal Reserve on the discount rate. Inflation has gradually slowed in the US in recent months, but this January figure symbolizes that the improvement in price growth in the country has almost stopped.
The Federal Budget
The proposed federal budget for the 2023 fiscal year was delivered to Congress in the United States. The US Senate Committee on Budget Appropriations stated that the total spending (projected at $1.52 trillion in 2022) might approach $1.7 trillion (Ederer & Pellegrino, 2022). $797.7 billion, or 10% more than this year, will be allotted for activities that involve the Pentagon (Akbulaev et al., 2020). Total defense spending for the Department of Energy will be $46.54 billion, $1.69 billion more than this year. The present US monetary policy aims to support economic development while maintaining a modest level of inflation.
The Public Debt and Deficit
As of October 3, the nation’s debt has risen to an all-time high. Intragovernmental Holdings (Intragovernmental Debt) make up $6.82 trillion, and the general public holds the remaining debt (Kaufman & Stallings, 2019). The amount is 5.7 times greater than the government budget’s anticipated revenue. Since 1993, when the Treasury Department started keeping records and making them public, the US has never had such a high level of debt (Kaufman & Stallings, 2019). In May 2022, the Congressional Budget Office warned that investors would lose faith in the United States’ capacity to make payments if the debt burden rises.
Furthermore, the US government deficit is a recurring and steadily growing component of the country’s economy. Many factors contribute to this, including increased spending on the military, infrastructure, and social programs, and lower corporate and individual tax rates (Tandon et al., 2022). If the deficit increases too much, it will increase interest rates and inflation, harming the country’s economy.
Critical Economic Problem
Over several decades, the slowdown in household income growth has been accompanied in the United States by deepening national and regional inequality between the top and bottom income deciles within racial-ethnic groups. Multiple factors contribute to the widening income gap, including its effects on human development and the sustainability of the economy (Jentsch & Lunsford, 2019). Such a gap reduces the opportunities for obtaining education, which is one of the critical factors in the growth of incomes for the poorest segments of the population.
In the United States, as in countries with lower average incomes, the problems of reducing poverty and slowing down the decline in the proportion of the poorest groups of the population are relevant. Disposable income dynamics are determined by several factors related not only to economics (Nowzohour & Stracca, 2020). It is determined by development, but also by tax policy, a set of measures of social support for the population in the form of transfers, changes in the labor market, structural features of immigration flows, and other circumstances.
Although the level of international cooperation of the United States will decrease relatively, the weight of the United States is likely to increase. Their future role in the international system’s architecture is difficult to predict, and US dominance can vary widely. The policies to be enacted soon correlate with increased interest rates to manage inflation.
In the long term, increasing labor and capital supply by encouraging businesses to operate in the United States rather than abroad through tax cuts can be effective. Needless to say, the nearest perspective is negative, as the effects of the COVID-19 disruptions are still critical in various economies. Nonetheless, the long-term predictions remain optimistic as the US economy remains relatively stable due to its economic and political systems.
Regarding a presidential proposal formulated as an aim concerning future policies, President Biden highlighted the importance of changing the tax system. Specifically, it is emphasized that entities with higher financial power are to be taxed more strictly compared to low-income individuals (The United States Government, 2023). As mentioned previously, more corporations operate in less rigid and affordable countries. This, however, negatively impacts the federal economy, which is why the economic proposal is arguably not fully functional in the current system.
Conclusion
Relatively slow economic growth rates will characterize the development of the US economy in the medium term. One of the determining conditions for sustainable economic growth of the world and the US economy is the involvement of the US in major international investment projects. The current US economy is experiencing several imbalances of a macroeconomic and structural nature. Most of these imbalances are natural characteristics of a market system undergoing structural adjustment. The most common imbalances are those associated with the boom in knowledge-intensive industries and the adjustment of production to changes in the global price environment for energy and agricultural products.
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