Ways to Bolster the Fragile US Economy

The United States has the largest economy in the world and as such, in 2008, the country produced approximately $15 trillion dollars worth of goods and services.  That said, the United States’ economy has suffered in the past few years.  Starting in 2007 and due to financial issues and a real estate slowdown, the US economy slowed down.  Then, in December of 2007, economists officially declared that the country entered a recession. 

A recession, itself, is usually defined as a certain period of decline in Gross Domestic Product (GDP) for two (or more) quarters in a row.  Although a recession is bad for the economy as a whole, a down economy can create opportunities for foreign exchange traders. That said, the United States officially exited from a recession in August of 2009, but many people still consider the economy to be stagnant at the present moment.

To encourage the economy to grow, a number of different solutions have been devised.  The most popular methods to encourage a healthy economy include implementing stimulus plans and administering austerity measures.  However, despite these two popular ways to encourage confidence in the economy, there have been a number of other ideas put forth that aim to grow the economy as well.  Some of these ideas include:

Emphasizing the Good Economic News:  Most headlines in American newspapers emphasize bad economic news.  To balance this information out and to increase consumer confidence, many people suggest that the more encouraging news should be emphasized as well. For example, the International Monetary Fund (IMF) forecasted that the global economy will grow faster than the organization originally thought. More specifically, the IMF raised its global growth prediction for 2010 to 4.6 percent. In addition, the economy in the United States has been growing at a rate of 3.35 percent so far in 2010.

Offer Tax Relief for the Middle Class: Many people propose middle class tax breaks as a way of stimulating the US economy.  They argue that a twenty percent tax break, for instance, will result in $200 billion in consumers’ pockets.  In turn, they expect that the American public will spend the money and this situation will then have a multiplier effect as the spending would result in more production that will boost hiring.  People who have jobs will then spend more money and the process will repeat in ideal circumstances.

Leverage Tax Money:  Programs such as “cash for clunkers” proved to be especially popular in the past.  The idea behind this program was to use a small amount of government money to encourage much more private spending.  A similar program involving $2.3 billion dollars for clean energy projects was included in the 2009 stimulus bill.  This program involved organizations receiving a thirty percent tax credit if the companies paid for seventy percent of the project . This program proved to be quite popular, but as there was only $2.3 billion dollars available, many qualified companies were not able to take advantage of this tax credit.  Thus, many people think that these types of programs that leverage tax payer dollars can be a helpful way to give the economy a boost this year.

Encourage Trade:  According to many experts, one way to boost the economy is to encourage trade with other countries.  US exports rose 11.5 percent early this year over 2009 totals.  This amount is significant as it accounted for over half of the United States’ total economic growth.  Obama plans to negotiate the final terms of a US-South Korea Free Trade agreement in 2010.  This trade agreement is expected to create momentum for free trade agreements with other countries.  In fact, the House Majority Leader Steny Hoyer stated recently that trade agreements with countries such as Panama and Colombia should move forward in 2010 as well.

Provide Regulation Clarity to Businesses:  Many business leaders in the US state that their uncertainty about regulation makes them wary about spending money.  For instance, there are some business leaders who are concerned about carbon emission regulation.  They argue that they do have some projects that are set to go, but that they are waiting for clarification regarding these carbon emissions.  Some people argue that the Senate may still have time to pass an energy bill before fall. They believe that a bill that will provide clarification will include a power plant emission cap that will explain how costly the emissions would be.  An acceptable bill would include a cap on power plant emissions, making clear how much more expensive those emissions would be. Individuals believe that clarification on energy laws will help both the planet and the US economy in the coming years.

All in all, there appears to be no shortage of creative ways to boost the US economy in 2010.  However, it remains to be seen how well all or some of these policy ideas will work – and what its affect on the markets, currency trading, and so on would be.