Introduction
There are various effects and causes of bad economy in the U.S. which has attracted people’s concern since the situation became apparent within recent decade or so. The paper addresses the causes of bad economy and reasons why it has reached such an alarming rate.
People will always demand for their rights which they really deserve from the government to which they pledge an allegiance. People scream everywhere that they are the %99; meaning that other wealthy people who are living comfortable and luxurious lives are just one percent of the population (Visco 1-12).
Governors have the total responsibility on the happenings within United States of America. It is more important to help people afford their needs than just letting the police hit them or put them into jail while they are fighting for justice. Innocent civilians should never be treated unjustly when demanding for their rights.
They leave their houses, their jobs, their belongings for the purposes of speaking on behalf of those who can’t speak for themselves with regard to better living standards. Why are they shunned through the use of guns? Why are some of them in prison?
Scope
The literature review includes all scholarly articles on economic crises and inflation rates obtained via the Academic Search Premier database using the key words inflation rate in the U.S and economic crises in the U.S. and published between the years 1984 to 2011.
Organization
The paper addresses some of the causes, effects of bad economy and reasons why it has reached the current situation. The introduction gives the overview of the economic crisis within United States of America with the subsequent sections describing the effects of bad economy on individual living standards.
This paper is formatted as an argument and complaint at the same time. At the end, it is directed to the wealthy people who are managing the economy and making it go down and back up as they want. Such a paper should be published in public, like newspapers where people around the global know what is going on in the United States.
There are some agencies that care about the matter and do not agree with harming the human rights. Words are not enough to describe what is happening nowadays. There must be a fair solution that persuades everybody and let them be proud of living in the United States of America.
Problem Statement
The paper focuses on real economic issues which encompasses the role of trade costs in the home bias goods spending, acquisition of assets as well as financing of investment expenses. These issues contribute so much in revealing the reasons as to why prices of goods do not adjust appropriately and quickly to exchange rates changes.
This has caused so much rising in prices making people to pay more for the same goods and services. The slow rate of increase in income as compared to inflation has led to low standards of living since most of the commodities are not affected on equal measure, making financial planning more cumbersome. This has forced the majority of the people to save more for the purposes of managing higher pricing of goods in the future.
Objectives
- To assess the major causes of bad economy, inflation and its effects on people
- To establish the necessary measures to be undertaken towards solving economic crises within United States of America.
Background on effects of bad Economy in the United States
The rate of inflation has badly hurt people’s standard of living, since the rising prices have ensured that the majority of the population pays more for same goods and services, the question the government should address is why are the poor oppressed to such extent?
The levels of income have remained the same or rather increased at a slower rate compared to inflation leading to drastic decline in the standard of living. The inflation rate has made it difficult for retirement planning because the target has to be kept higher for the purposes of affording the same quality of life in future (Hanson et al).
This requires the citizens to save more currently for the reasons of paying for highly priced goods and services in future years. Currently goods and services cost much hence leaving people with less to save out of their income. The United States government has increased the mortgage interest rates, since the inflation rates have spiraled faster than the return on fixed assets hence making them become less valuable.
The less fortunate cannot afford the luxury of paying for mortgage. Their value is further depreciated when people rush to sell them forcing the U.S government to offer them at higher interest rates in order to sell all of them. The difference in prices due to inflation is a real reflection on the deterioration of economic values within the society.
Causes of bad economy and reasons why it has reached this situation
According to some analysts one of the contributors towards bad economy is outsourcing. People have been hired from foreign countries to work in the U.S, and this has negatively impacted the economy. This is because thousands of Americans have been stripped of their jobs making America to loose competitive advantage to other countries hence permanent loss on economy and skilled workers.
Both semi-skilled and skilled jobs have been lost through outsourcing to other countries (Saleem). This has indeed made many Americans to remain in poverty since even the minimally skilled jobs are difficult to find, hence reduction in consumer spending as well as tax revenues.
Manufacturing sector have experienced tremendous job losses, almost one-third have been displaced in the labor intensive industries and on reemployment their wages are reduced by at least 15%. The government should know that those who are jobless are unable to purchase homes and at the same time cannot spend money. Owing to these it should be realized that the producers are unable to make money if people do not buy.
The state, local and federal governments experiences loss of income due to outsourcing. This is because there are lesser payroll tax and contributions to social security and Medicare as well as sales and other tax revenue (Ben-Zion). Besides loss of skilled labor, the country also looses monetary gains.
The U.S government should be aware of the fact that manufacturing jobs pay more than service jobs and at the same time help in creating national wealth. The closing of factories leads to loss of industrial infrastructure hence exporting the money which could have otherwise been made available for the expansion of the U.S. economy (Visco 1-12).
Plan of action
Several measures should be taken for the sole purpose of dealing with the economic crisis leading to high inflation rates. This section of the paper enlists some of the appropriate and possible actions that should be taken for the purposes of fulfilling the aforementioned objectives. There is belief in many that inflation makes it easier for the government and other financial institutions including their employers to deceive them.
This calls for quick review on financial laws especially those safeguarding price controls on goods and services. This follows the fact that changes in prices make it easier for some employers to deceive employees concerning their real wages (Bomberger 381-392). According to one recent article “On Money Illusion” there is belief that majority base their level of satisfaction on nominal earnings hence ignoring the real earnings (Amadeo).
The effects of Inflation involving the complexity with which financial assets are evaluated should be reviewed to avoid the possibilities of financial Institutions defrauding those who are perceived low income earners and of average lifestyle. Cases where the government delays in changing tax brackets after recovery from inflation requires attention for the purposes of preventing the majority on high tax payment (Ball and Croushore).
On the sides of production, firms are capable of improving their productivity whenever prices stabilize, but finds it difficult in case of inflation. Individuals have found it difficult to judge on their financial abilities in relation to future commodity prices.
On the other hand businesses also find it difficult to account for profit margins in relation to cost of production. The rise in oil prices has led to low productivity on majority of American workers since their wages shrank significantly. Only few from the elite group benefit by the redistribution of wealth from creditors to debtors (Bomberger 381-392).
Some effects of economic stress are very open but there are a number which seems hidden. The less obvious effects normally vary across markets owing to the United States system which is normally inclined towards employment based coverage. The nature of the economy has shaped the various complex interactions among employment and financial access to healthcare.
Many employed people have been forced to pay health coverage even during economic downturns; few employers are always willing to drop health coverage in such times (Batchelor and Dua). Those with low ranked jobs working in small firms are likely to loose their coverage when they loose their jobs making them more poor and vulnerable, can’t the government think on positive strategy to ensure safety for all its citizens?
Concerning health coverage, the design and cost of employer-sponsored coverage have proved very unfair to the low income earners. This is since the costs and charges leave them with little to take home for survival purposes causing majority to seek for jobs with no health benefit offers (Bernstein 2-7). Within contracting economy, small employers have found it difficult to cater for affordable coverage for their employees owing to limited resources not capable of managing health benefits.
Most citizens are unable to afford medical services calling for proper legislation capable of restructuring healthcare delivery. A lot should be done to address and transform health care landscape within United States. There is evidence that economic pressure is leading women to seek for reproductive services such as long-term contraception. The denial to cheap access to medical care has led to adverse pregnancy outcomes (Adler 3140-3145).
Conclusion
High inflation rates have imposed adverse effects on the economic performance since it has the capability of distorting both investment and consumption levels (Samuelson and Solow 177-194). Many people in low income bracket have perceived low living standards owing to the fact that their incomes cannot cope with rising prices of commodities.
Those who have retired have been greatly affected since they are unable to adjust their pensions as well as financial investments. The situation has been made worse by the fact that Social Security payments are currently indexed to inflation. The reality concerning this which requires the knowledge of the government is that an effect of inflation pushes up prices before rise of wages can be realized.
It would not be favorable for the citizens if at all United States of America would continue operating in such like economic situations which would not guarantee any good results in the future.
Examination should be done on the long-run evolution of the country’s competitive exchange rates as well as well as stock prices. Correction should be made for the purposes of making the dollar exchange rate read below any historical low, with the same applied to the stock prices. Monetary policies play major role in the process of regulating the effects due to correction within stock markets.
Correction of the monetary policy would help in countering the substantial and negative effects of fall in stock market prices. With due respect to the financial department, the document thus appeals to swift government intervention on these matters for the benefit of the common citizen since there is a strong belief that United States government is well able to extensively address this matter and provide lasting solution to the problems discussed.
Works Cited
Adler, Nancy. Socioeconomic Inequalities in Health: No Easy Solution. Journal of the American Medical Association 69, (1993):3140–3145.
Amadeo, Kimberly. How Does Inflation Impact my Life? 2009. <https://www.thebalance.com/us-economy-4073968>29th November, 2011
Ball, Laurence & Dean, Croushore. Expectations and the Effects of Monetary Policy. National Bureau of Economic Research Working Paper, 5344 (1995)
Batchelor, Roy & Pami, Dua. Household versus Economist Forecasts of Inflation: A Reassessment. Journal of Money, Credit, and Banking 21 (1989): 252-257.
Bernstein, Jill. Impact of the Economy on Health Care. Journal of Healthcare Financing And Organization, 8 (2009): 2-7
Ben-Zion, Uri. Recent Literature on the Impact of Taxation and Inflation on Interest Rates. In Vito Tanzi, ed., Taxation, Inflation, and Interest Rates. Washington: International Monetary Fund, 1984.
Bomberger, William. Disagreement as a Measure of Uncertainty. Journal of Money, Credit and Banking 28 (1996): 381-92.
Hanson, Thomas, Mclanahan, Sara & Thomson, Elizabeth. Economic Resources, Parental Practices and Children’s Well-Being. In Consequences of Growing up Poor, edited by Greg J. Duncan and Jeanne Brooks-Gunn. New York: Russell Sage, 1997.
Saleem, Hasan. How Outsourcing Affects the U.S. Economy. 2008. <https://www.dirjournal.com/>29th November, 2011
Samuelson, Paul & Robert, Solow. The Analytics of Anti-Inflationary Policy. American Economic Review, 5 (1990): 177-194
Visco, Ignazio. Global Economic Integration: Opportunities and Challenges. The Economist, (2000): 1-12