United States GDP

United States GDP

For a few years now, the United States GDP has been growing at a rate of less than 4% a year. This rate is insignificant, especially when US economic growth is compared to that of emerging states including China and India. Most economic forecasters are disappointed by this worrying trend. For instance, a section of respected economic analysts is beginning to think that the GDP slump is indeed the new normal. However, all is not lost because during past economic recessions, US repeatedly made a dramatic rebound. It is an enough proof that solutions to the current US economic problems exist.

A weak economic reading posted at the beginning of this year is a reflection of the previous year’s GDP woes.  While this is more than a coincidence, bad weather conditions during winters are partly to blame. Lately, some of the densely populated areas in the United States receive a fair share of extreme weather conditions during fall and winter. This slows down the movement of goods and exports hence hurting the GDP performance. Besides, evidence has been tabled regarding the distortions of economic readings caused by the use of outdated formulas to make adjustments on normal seasonal variations.

Currently, Federal Reserve officials and other economic watchers are weighing in on the option of raising interest rates to spur GDP growth though it is not yet clear if the volatility is finally settling. Many businesses depend on the robustness and stability in GDP growth to implement their expansion plans. In addition, a show of confidence by economic policy makers wields a tremendous effect on positive decisions made across the business world.

            It is undeniable that the current economic data is sending mixed signals. Latest reports indicate that more jobs are being created. On the other hand, numerous surveys regarding retail sales and industrial activities paint a grim picture. The weak activity in these sectors neutralizes positive gains in other optimistic sectors hence a ripple effect on the overall GDP performance.  While the latest GDP report represents a sketch in economic prospects, it reveals forces shaping Americas’ economic performance now and in the near future.

 Falling exports result from a steep run-up in dollar value at a global stage, especially during 2014. Still, this observed shift would possibly bear a weight on the overall growth at the end of this year.  Notably, a stronger US dollar makes the country’s goods abroad more expensive, hence lowering the competitiveness. Other goods from the developed world take advantage of this development by exploiting the opportunity. Even more alarming, commercial structure investment falls at an annual rate of more than 20%. This cuts short GDP growth by just below a percent. Energy prices are actually falling. Thus, this significant drop is a reflection of a massive pullback by speculative investors in the drilling of mines and oil wells. Therefore, there is no need of worry as the contraction is fueled by temporary market tremors. As soon as the oil prices recover, chances are that commercial structure investors will reconsider their stance for the better.

Solution

            America’s constitution empowers the federal government to take control of the economy. However, this right has gradually waned. For instance, World Trade Organization has constantly challenged US trade policies because the federal government has an absolute commitment to the organization’s mandate. A close scrutiny reveals that this international body has little interest, if any, in offering assistance to the jobless American citizens. Therefore, there is a need for the government, through the congress, to reconsider its stance in surrendering its rights to a foreign body. The federal government should borrow a leaf from the countries whose economies are performing better. China’s government, for example, wields greater economic control; hence it is not surprising that its rise is increasingly becoming a threat and a challenge to US’ dominance on a global platform.

 Secondly, there is a need for restoration of reform taxes and tariffs. Globalization of trade and business activities is taking a toll on American markets. Most countries are taking advantage of America’s unprotected internal business environment. As a result, US industries are taking a major hit through unfair business practices introduced by foreign business entities. If tariffs and taxes are reinstated, regulation on the influx of cheap goods being dumped in the country will be ensured, hence a guarantee of protection to local industries. It will also drive up the consumer spending thus boosting GDP performance in the long-run. If income taxes are lowered, tariffs and revenues collected from foreign firms could be used as a cover-up for government spending.

            America’s infrastructure is crumbling. Its manufacturing sector is weakening, but the tables can easily be turned if the value added tax and tariffs are imposed on the influx of revenue sources. The excess revenue collected can be utilized in economic stimulation policies such as real job creation in sectors like manufacturing, and Research and Development (R&D). Congress has an upper hand in fostering Americas GDP growth. A problem creeps in when the congress fails to exploit its constitutionally-granted mandate to fix the loopholes in the country’s economy.