Improving the Long-Term GDP and General Economy of the USA

The United States are amongst of the major economies of the globe. The general performance of the economy of the United States has direct ramifications on all economies throughout the universe. This is largely because the United States dollar is employed as the standard of value during international trade. During instances where the economy of the United States performs well, the demand for the dollar is likely to raise hence its appreciation (Brown & Burton, 2009). A strong dollar has negative ramifications on the exports of the United States. When the dollar is strong, commercial entities that are exporting products from the United States tend to face comparatively low levels of competitiveness. The prices of their products and services tend to be priced higher than the ones whose prices are denominated in currencies that are weaker than the United States dollar. Consequently, this has negative consequences on the general outlook of the economy of the United States. Exports serve as income generating activities in the United States. As a result, the government needs to implement national economic policies that will facilitate the growth of the exports.

In the recent past, the Chinese government has become extremely aggressive at the international markets. China has focused on establishing trade partnerships aimed at enhancing its prospects at the international markets. Specifically, it has entered into trade partnership agreements with major economies such as South Korea, Taiwan, Japan, and Australia. In the long term, it aims at dominating the Asia Pacific region in terms of trade and economic power. China is perceived as a major competitor of the United States. The currency of China is not determined based on prevailing market conditions. Instead, the value of the currency is set by the central bank referred to as the People’s Bank of China. This is a stratagem aimed at ensuring that the products from China remain competitive in the international markets (Brown & Burton, 2009). Therefore, China will manage to realize economic growth in the long term. The United States should formulate economic policies that will stimulate the demand for its products in the international level. Since it would not be cautious for the US to fix its currency value and then it is suitable for government to provide an incentive to the exporters. For instance, the government can reduce the overall tax that is charged on exports. This move will facilitate the exporters to reduce their costs of operation, which will enable them to price their products in a competitive manner. Consequently, the overall demand of products from the United States is likely to rise, hence leading to the economic growth in the long term.

Over and above that, the government should reduce its overall reliance on debt. Over the years, the United States have been increasing its overall appetite for debt. As the prevailing debt levels of the country increases, the overall degree of economic growth reduces. This is mainly because debt financing is expensive, and the natures of costs attributed to debt financing are always increasing in the long term (Boccia, 2013). As a result, the government should look for ways of raising financing through revenue enhancement. At the moment, the overall debt of the United States is estimated to be approximately ninety percent of the GDP. This implies that the economy of the United States is primarily funded by debt. The United States is recovering from the Global Financial Crisis that took centre stage in the year 2008. However, if the government does not reduce its current degree of reliance on debt it is likely that the country will experience another economic crisis. Japan and Greece are countries that experienced a financial crisis largely because of the nature of debt levels that they used to maintain. The United States is experiencing high costs of financing its government, and a reduction in the overall level of debt is likely to have positive implications for the long-term growth of the GDP and the economy. The government needs to study the kind of measures that were implemented in Japan and Greece so as to reduce their reliance on debt. Failure to minimize the prevailing degree of debt is likely to have adverse implications on the global economy.

In addition, the United States should raise the minimum wage. This is a move aimed at enhancing the purchasing power of the majority of the persons living in the United States. The purchasing power is determined by the income generated. The increase in incomes leads to a rise in purchasing power (Covert, 2013). The demand for local products is likely to increase with an increase in purchasing power. This is because the majority of the people will be able to afford various services and products being rendered in the market. Consequently, this will have positive implications for the long-term growth of the GDP and the economy of the United States.

References

Brown, B., & Burton, M. (2009). The Financial System and the Economy. New York: M.E. Sharpe.

Boccia, R. (2013, February 12). How the United States’ High Debt Will Weaken the Economy and Hurt Americans. Retrieved Nov 25, 2014, from The Heritage Foundation: http://www.heritage.org/research/reports/2013/02/how-the-united-states-high-debt-will-weaken-the-economy-and-hurt-americans

Covert, B. (2013, December 19). Raising The Minimum Wage To $10.10 Would Boost Growth By $22 Billion. Retrieved Novemeber 25, 2014, from ThinkProgress: http://thinkprogress.org/economy/2013/12/19/3091141/minimum-wage-gdp-jobs/