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U.S Economy: There's Still Hope for the Future

Like many government economies in the world, the U.S economy of late has beencaught up in several economic hiccups. There have been lots of concerns onunemployment rates, the declining production, which is being replaced by an

increase in imports among other many issues. Here are some of the economicchallenges affecting the U.S.

Problems Affecting the United States

Production- The United States no longer produces goods to satisfy the needs of hercitizens but rather imports. Where production takes place, then it is in small scalesuch that the deficit that is not met by such production has to be imported. For manyyears, the U.S has been seen as a super power but this status is slowly fading awaydue to her ever increasing demand for imported goods.

Other countries that have been racing up with the U.S in supremacy battles are nowplanning to celebrate by rendering the U.S a completely dependent economy inproduction, innovation and even finance. Hence, this is a major blow to the UnitedStates economy, where most of the production assets instead of being put on useare now being sold as the country routes to taking massive debts in an attempt tosustain her high living standards.

Foreign Trade Practices- The U.S trade and globalization policies have beendetrimental for long. Instead of manufacturers in the U.S targeting their potentialmarkets, they have always been more or less struggling to compete with China and

Mexico in designing, engineering and even producing for third world countries.

Is the U.S economy likely to recess? Here are reasons as to why this is mostlikely to happen.

The problems faced by the U.S currently are a clear indication that if nothing is donethings are going to be much worse. Here are seven reasons as to why recession ismost likely to happen.

1. Stunted Growth of the Economy- the only way to beat recession, hands down,is to have a robust economic growth. This is what the U.S economy lacks as

evidenced by the annual economic growth rate registered in the last 3 yearswhere in 2010, her economy grew by 2.4%, 1.8% in 2011 and 2.2% in 2012. Thelast quarter of 2012 seemed to be the worst hit by stunted growth where a growthrate of only 0.4% was registered.

Ever since the 2ndworld war, this is the lowest economic growth rate the U.S hasever registered, as in most cases the annual growth rate registered has nevergone below 3.4%. Similarly, after every recession, the U.S has been experiencingan economic growth rate of between 5-6% but this has not been the case in thelast three years.

2. Unemployment- Like other governments in the world, the U.S is now slowlyjoining the list of countries with a high rate of unemployed people. According to

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the Bureau of Labor Statistics, the month of March this year registered a declinein labor force by 496,000. Much worse, is the fact that most Americans havealready given up in their job search.

3. The return of Home Foreclosures- of late, there has been a rise in Federal

Housing Authority. Among the factors that are alleged to be behind this FHA riseis unemployment rate which is discussed above.

4. Lack of Consumer Confidence- April this year marked the 9thmonth of a sharpdrop in consumer confidence. What this means is that consumers are not likely tospend let alone invest. Job seeking also tends to decline among them.

5. Chinas Economy- the drop of Chinas economy from its usual average of 10%to 7.9% in the fourth quarter of 2012 and finally to 7.7% in the 1stquarter of 2013is a clear indication of tough times ahead.

6. Europes Economy- the EU shrunk its GDP by 0.6% last year and it's projectedthat this year they may shrink it by 0.3% as they had suggested. This will not onlymake the EU economy weak but will mean a much weaker U.S economy.

7. Taxation and Revenue Expenditure- Obamas administration has continuouslyassaulted the economy through high taxation and heavy government budget. Theintroduction of new taxes as well as regulations on individuals and businessescoupled with bad economic policies like those passed by Washington are a goodrecipe for recession.

Road Map to US Economic RecoveryAccording to expertswarning, the current US situation is likely to continue for thenext four years, which will be far much above the average economic recovery of 58months ever since the 2ndworld war. In these four years, there will be an upswingthat will lead to lack of excesses that often lead to contraction, slow inflation,shrinking of household debt, slack in the labor market and unemployment as well asa depression in the housing market.

Economic experts such as Mark Zandi, Chief Economist at Moodys Analytics, hasfurther warned that any economic shock can send the recovery off course. This canlead to things like the collapse of the stock market, sudden spike in long-term

interest rates or even worse, a confrontation between the US military and Iraq henceleading to an increase in oil prices.

To avoid worse economic situations, action is necessary and inevitable. This,therefore, begs the question: What should be done to save this situation or ratherpromote economic recovery? There are quite a number of interventions that can beadvanced by both the private sector and the government. Here are some of them.

Paying More for Fast GoodsFor years, those working in the food industry have been complaining of poor pay. Anintervention into the retail jobs earnings can really help boost the U.S economy. A

good pay will always amount to an increase in the workers purchasing power. This isbecause workers with money are more likely to buy more consumer goods like cars,

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homes, appliances among others. This will boost the government, as more revenuewill be collected from taxes.

This is what the renowned economist John Maynard Keynes termed as aggregatedemand as a result of good wages hence leading to the multiplier effect. Therefore,

the minimum wage per hour should be between $10-15 in order to achieve this.

Investing in the Manufacturing SectorTough economic times have generally contributed to the ever-decliningmanufacturing and construction industry. There are now fewer homes beingconstructed as well as fewer cars being made annually. Car repairs are reported tobe on the increase and this is very worrying because the old cars are not going tolast forever. Hence, the law of diminishing returns will definitely come to play.

It is, therefore, essential to promote such activities that will enhance consumerspurchasing power and so will encourage more manufacturing and construction. A

rush of household formation can also unleash pent-up demand for almost everything,as more young adults will be able to spend after many postponements.

In conclusion, the U.S economic situation needs a lot of intervention. Propermeasures should be put in place so as to curb the high unemployment rates and thedeclining manufacturing sector, which is forcing the US to go for imports rather thanbeing an exporter. This is not only doable but also achievable.