Economic Problems of the United States

Economic Problems of the United States

By Dr. Lalit Kumar Setia |  @drlalitsetia  |  drlalitsetia@gmail.com  |  Created October 03, 2018 
Updated Sept 14, 2019

Around the world, countries are facing new economic problems. The China is lack of children due to its earlier decision of family planning. Now it is looking for the solutions to keep the economy growing without affecting the economic growth rate. The Singapore is also facing problem of 'getting labour forces older' and productivity is started to fall and it decided to foster technical skills training for older workers to boost the city's productivity. The economies of whole world, are becoming worried due to less rate of economic growth.

The Context of Debt-trap:

The economy of Unites States is one of the largest economy of the world. In terms of per capita GDP (PPP), it is sixth highest economy of the world. It has highly developed and technologically sound sector of services holding 80% share of its output, which made it so strong in the world. Apart from services sector, it has 15% manufacturing sector. The biggest advantage to the economy of United States is its citizens, who are well-educated and productive in terms of businesses. The politically stable government along with strong legal system provides stable business environment for the entrepreneurship, innovation, research and development. In 2008, the economy faced a major recession and till date it is not recovered completely from the economic recession. The economy is suffering from various factors like high consumer indebtness, low interest rates, and widespread mortgage lending which led to collapse of the housing sector in United States and collapse of various banks. In order to recover, the government intervened and purchased the mortgage-related assets. The growth of economy is still low and there is widespread unemployment.

The Current Account Deficit of United States:

The current account deficit (CAD) is also a great concern for the United States economy. The United States' President Donald Trump is taking initiatives for reducing the CAD. The CAD means the goods and services are being purchased more from the abroad than the value of goods and services being sold to the abroad countries. The imposition of import duties on the goods being imported from China, is an initiative to discourage the imports so that the goods and services which are made in USA can be safeguarded from the competition of China products.

Dependence over imported Oil:

The United States produces the oil but due to higher energy needs, it depends upon the imported oil. However, the economy increased the oil production to a great extent and now reduced its dependence on imported oil to a great extent. Due to increasing debt of United States which became $21 trillion on 31^st March, 2018, the country is facing problems and being seen as unable to meet its debt obligations in near future. In case, the further crisis came in the economy, the economy can become bankrupt as Iceland.

Problem of maintaining liquidity:

Due to developed nation, the economy requires to make efforts to keep the liquidity in the economy so that the recession may be avoided to make a suffering again. Government finds out the areas to spend more particularly in the areas of social security and medical services to the citizens. The economy is surviving due to raising funds from issuing United States debt at higher rate of interest. The investors purchased the United States bonds at higher rate of interest and it also increases the liquidity in the economy. The issue of United States bonds also increases the demand of Dollar, and the value of Dollar is going up now-a-days in terms of other currencies. But issue of United States bonds is not a permanent solution to the economic situation of United States.

What can be done to make a permanent recovery?

The permanent solution can be to increase the exports and decrease the imports which is possible only after cutting the spending of American citizens. It is very difficult to control the expenditures which are being spent by the citizens. Further, the generation of jobs for the Americans can also boost their earning capacities and increase in the tax collections. Thirdly, it is required to improve the entrepreneurship skills by cutting costs and enhance the profits of the enterprises settled in United States.

Do you think something more the United States can do? Please tell your views?

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