InflationThe United States policy regarding inflation is centered around the Federal Reserve. The Federal Reserve helps to maintain a low and stable inflation rate. According to the most recent figures, the United States inflation rate is at 2.5%, which, in many respects, is close to an ideal rate. The Federal Reserve thus ensures the inflation rate remains consistent at that mark by controlling the money supply in the country to manipulate demand and spending. Overall, the Federal Reserve is highly successful, as it ensures the money supply stays low. If the money supply were to increase substantially, there would be a large increase in demand and spending which will bring the inflation rate up, a situation most governments look to avoid.
GrowthIn regards to continuing and improving its 2.3% GDP growth rate, the United States government recently lowered individual taxes for most income brackets. The current 2018 tax bracket compared with the previous 2017 bracket is shown below:
Lowering individual taxes for most income brackets is an effective measure for bringing about GDP growth, as it leads to a majority of United States citizens having more disposable income with which they could spend on goods and services in the country. Since consumer spending forms a large component of GDP, an increase in spending will help drive economic growth. A consequence of an increase in disposable income, however, is a possible increase in savings, as United States citizens might prefer to improve their financial security. Since savings act as leakages in the economy, the United States objective of economic growth from such policy might not be completely achieved if savings were not fully reinvested. |
UnemployementIn order to reduce unemployment to the current rate of 3.9%, the United States government created CareerOneStop, a federally funded program that helps unemployed people find jobs, receive training, and explore different careers that might be of interest. This policy was a good measure to deal with unemployment as it taught the unemployed skills in addition to linking them to jobs that require those skills. CareerOneStop therefore simplified the employment process and as a result, effectively dealt with unemployment. Looking at the broader picture, the unemployment rate in the United States decreased from last year’s 4.4% figure, meaning that the government should likely sustain its policy of CareerOneStop and should attempt to introduce new policies to ensure the unemployment rate continues to decrease.
Equity Although the United States does well in achieving most of the macroeconomic goals, equity remains a goal that isn’t being achieved. The largest problem the United States faces is equity, evident in its high Gini Index of 0.415, which is considered to be high in comparison to other developed countries, such as Canada, which has a Gini index of 0.34. Recognizing the need to reduce its Gini index and improve equity in the country, the United States government resorted to establishing an earned income tax credit. Under this policy, individuals and families with low to moderate earned incomes can have a portion of their tax money refunded. This policy therefore improves the income distribution in the United States as large taxes remain on the upper class while the lower class enjoys a small reduction in the money they pay to taxes. Even though this government policy of earned income tax credit is relevant in improving equity in the country, it alone isn’t enough as the Gini Index remains high, meaning the United States should likely increase its efforts to solve the problem. |