Economics

 In 2008 the United States experienced its worst financial crisis since the Great Depression.  The economy shrunk by 8.9 percent, unemployment was at 7.3 percent and increasing, and inflation rates fell from 4.1 percent to 0.1 percent.  Since the end of 2009 the US economy has begun to grown, unemployment has started to fall and inflation has remained low.   To strengthen the economy, maximize employment, and stabilize inflation, Congress and the Federal Reserve Bank need to change fiscal and monetary policy by increasing taxes on the rich, lowering them for the poor, increasing government spending, lowering interest rates, and buying more Treasury Bills.
Raising taxes for the top five percent of the population and lowering them for the rest of the US citizens will stimulate the economy and create jobs.  The top 5 percent of Americans own 70 percent of the nation’s wealth.  The rest of the country only owns 30 percent of the nation’s wealth.  95 percent of the population owns only less than a third of the wealth.  The government should raise taxes on the rich, which is only 5 percent of the population, and lower taxes for the rest of Americans.  Lowering taxes boosts the economy because people have more money and will be more likely to spend money.  This helps businesses that will be able to grow and hire more employees, increasing employment.  A fiscal policy of raising taxes hinders economic growth, but the government will only be raising taxes on a small number of people, so overall the economy will grow and the increased taxes from the rich will help pay off the US debt.    

The government should also spend more to boost the economy.  When the government spends and invests more it creates now jobs.  GDP growth would be significantly less without government spending.  The government should invest wisely in education, innovation, and infrastructure to increase economic growth and employment, but not to increase the debt.  Investing in education will give more people the chance to get higher paying jobs, which will increase jobs and provide job security.  Investing in innovative technologies will keep the United States ahead and create better jobs.  Infrastructure, such as transportation and communication systems, can be improved to support the growth of businesses.  Once the economy has achieved adequate growth, the government can cut back on spending to decrease the federal deficit.

Monetary policy is how the Federal Reserve System uses the Reserve Requirement, interest rates, and the buying and selling of Treasury bills to affect the money supply.  When the Fed changes interest rates, all the banks in the United States have to change their interest rates.  If the Fed were to lower interest rates, economic growth would increase.  People and businesses are more likely to take out loans from banks if they don’t have to pay as much back.  That means that people will grow expand their businesses some people will start new businesses, all of which creates more jobs.  If the Federal Reserve Bank lowers its interest rates, inflation will eventually rise and become a problem.  Inflation means that the economy is growing, but too much inflation is bad because the dollar will buy less and people will have to spend more money for the same things that used to cost less.  The Fed should lower interest rates carefully to avoid too much inflation. 

The Federal Reserve Bank should buy more Treasury bills to stimulate the economy.  When the government buys T-bills it’s giving money to businesses so that can expand and will be able to hire more people, creating more jobs.  The Federal Reserve Bank should decrease interest rates and buy more T-bills to stimulate the economy, create jobs, and keep inflation low and steady.

Fiscal and monetary policy need to be carefully adjusted to avoid increasing the federal deficit and inflation.  While lowering taxes and increasing spending can help grow the economy, but in the long run if the government doesn’t invest enough in education, innovation, and infrastructure the United States won’t be able to compete international businesses.  Interest rates need to be carefully adjusted so that inflation doesn’t rise or fall drastically.  It is essential that Congress and the Federal Reserve Bank increase taxes on the rich, lower them for the poor, increase government spending, lower interest rates, and buy more Treasury Bills, to strengthen the economy, maximize employment, and stabilize inflation.