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Posted on June 24th, 2012, by

The current economic recession in the USA is one of the major challenges to the US politics and business. In fact, the country have not seen such a profound economic crisis since the Great Depression and the rapid deterioration of the socioeconomic situation undermines stability in the American society that raises new threats and problems the government has to solve. In such a situation, the President Administration should naturally react to the problems and challenges the USA is currently facing. Thus, in response to the economic recession, which has started to outgrow into a profound economic depression, the President Administration has already developed the 2009 federal stimulus plan, which is supposed to change the situation in the US economy for better and stabilize the national economy of the USA by the end of the year. At any rate, the government stands on the ground that with the help of the aforementioned stimulus plan, it will be possible to minimize negative effects of the economic recession and revive the national economy. At the same time, the 2009 federal stimulus plan evokes severe criticism since the plan implies the interference of the state in the national economy, including changes in the fiscal policies of the state, state programs and financial support of the national economy. Obviously, such criticism contradicts to optimistic views of developers of the 2009 federal stimulus plan. In such a situation, it should be said that the 2009 federal stimulus plan is an important socioeconomic program which the US economy needs badly, but the plan actually defines the consistent change in the state economic policies enforcing the role of the state in the national economy, which does not necessarily mean consistent improvement of the socioeconomic situation in the country, but implies the enforcement of social security due to the support from the part of the state.


Major points of the 2009 federal stimulus plan

On analyzing the 2009 federal stimulus plan, it is important to lay emphasis on the fact that the plan implies a consistent strengthening of the role of the state in the national economy. In actuality, the strengthening of the role of the state in the national economy contradicts to traditional principles of the US economy which has always been characterized by liberal policies and minimal impact of the state on business and economy at large. As a rule, the US economy developed on principles of open market economy where business developed under conditions of fair competition. In such a situation, the introduction of new state policies which imply the interference of the state in the economic development of the country means a total change of the state policies. In other words, the implementation of the 2009 federal stimulus plan implies that the state becomes one of the major players in the national economy and business.

In this respect, it should be said that the 2009 federal stimulus plan implies a substantial support of different industries and categories of the American population from the part of the state. To put it more precisely, the state is supposed to increase its spending on numerous social programs and direct financial support to people in need as well as major companies and industries. For instance, according to the 2009 federal stimulus plan American low-income workers can count for the financial assistance from the part of the state which is supposed to pay off additional $ 250 checks for 150 million of employees and send them out (Kane, 2009). The similar financial aid is supposed to be directed in terms of the Social Security supplement to help those Americans whose seniors earning are under $50,000 (Hilsenrath and Weisman, 2009). In such a way, the government takes a social responsibility to support financially people who suffer from low-income and cannot afford living without such financial support. At the same time, the state financial aid to employees implies that it is state but not only employers that take responsibility for the social security of Americans.

In addition, the 2009 federal stimulus plan implies the creation of $10 billion fund to help responsible families avoid foreclosure (Barak Obama Advisers Unveil Economic Stimulus Plan, 2009). The latter is particularly important in the current economic situation, taking into consideration the fact that the current economic crisis is initially provoked by the crisis in the mortgage market and housing industry. In such a situation, many American families face a threat of foreclosure being unable to pay off their bank loans and afford maintenance of their homes. At the same time, they fail to pay not because of their unwillingness to pay but simply because their financial position has deteriorated consistently, while the payments they have to pay increased substantially. As a result, the payments become an unbearable burden for many American families who do face a risk of becoming homeless without the state support.

Furthermore, the 2009 federal stimulus plan implies the provision of financial aid of the federal government to state and local governments. The federal government has to help state and local governments which are the most affected by the crisis in the housing market. In fact, such governments cannot afford funding all their programs and expenses without the external support. As a result, important programs and issues can fail to be funded properly. In this respect, the infrastructure of states is in a particularly dangerous position since the local and state governments can redirect funds from the local and state budgets to support people who need state assistance or to support the housing industry from the further degradation.

Another important point of the 2009 federal stimulus plan is the expansion of unemployment insurance (Hilsenrath and Weisman, 2009). The unemployment insurance is extremely important, especially in the current economic situation, when the USA faces a problem of the growing unemployment rate. In such a situation, many Americans feel insecure because of the lack of unemployment insurance. In actuality, this means that they are likely to get little or no financial support, in case of losing the job. Potentially, such a situation can increase dramatically the social tension in the USA and provoke a strong opposition from the part of unemployed to all initiatives of the state and, what is more, the growing social tension can outgrow in riots and open confrontation between the most deprived categories of the US population and law enforcement agencies. Hence, the unemployment insurance is supposed to help unemployed to overcome negative effects of the economic crisis and simply to survive in the current economic situation.

It proves beyond a doubt that the aforementioned points of the stimulus plan imply a consistent increase of the state budget expenses. At the same time, the federal government plans to spend over $800 billion to support the national economy of the USA (Kane, 2009). In this respect, it should be said that $800 billion are supposed to be directed to numerous social programs, among which it is possible to single out the funding of the national education system and enlargement of health care insurance coverage for all Americans. In fact, these programs are very important because the educational system of the USA does need the state support to provide Americans with equal education opportunities (Witt, 2009). At this point, it is worth mentioning the fact that the larger education opportunities open larger job opportunities. As for health care insurance, the state support of health care insurance is also extremely important because over 40 million of Americans are uninsured that means that they have either no or limited access to health care services (Cantor, 2009). In addition, today, the costs of health care services are increasing dramatically that increases the risk of the growth of the number of uninsured Americans. In such a context, the lack of health care insurance is a real threat to the life and health of many Americans.

Furthermore, the state social programs also imply the development of special programs which can solve the problem of unemployment. To put it more precisely, the 2009 federal stimulus plan implies the creation of 2,5 million job places and the increase of state spending on roads, bridges, schools and clean-energy programs (Hilsenrath and Weisman, 2009). All these programs imply the elimination of unemployment and stimulation of the economic development. The state spending on roads and bridges will naturally contribute to the employment of Americans and improvement of the infrastructure or, at least, it will allow the USA to maintain its infrastructure at the present level.

Clean-energy programs will stimulate the introduction of fuel-efficient technologies which naturally increase the efficiency of the national economy at large because American companies and citizens can save costs on energy that increase their savings and makes American products more competitive on international markets.

Finally, the 2009 federal stimulus plan implies consistent tax cuts, which are also extremely important in the context of the current economic recession. In fact, the stimulus plan implies the elimination of capital gains tax and the government expects to save $300 billion in tax cuts for Americans (Hilsenrath and Weisman, 2009). Obviously, such a substantial reduction of taxes will improve the position of American tax payers. The ease of fiscal pressure is essential to stimulate the economic development of the country because it allows Americans to invest more in the national economy, while high taxes deprive them of an opportunity to get money to make investments, while investments are crucial for the national economy today. Hence, the 2009 federal stimulus plan aims at the introduction of new fiscal policies which can stimulate economic activities in the USA that naturally contributes to the revival of the national economy.

Criticism of the 2009 federal stimulus plan

At first glance, the 2009 federal stimulus plan seems to be quite effective since it aims at the macroeconomic stabilization, including the minimization of unemployment, and, simultaneously, the plan is supposed to stimulate economic activities in the USA. However, the 2009 federal stimulus plan has a number of drawbacks while its main points can fail to improve the economic situation in the USA. First of all, it should be said that the government play to spend $800 billion to support the national economy and implements social programs means that the federal budget expenses will increase substantially. Consequently, the federal budget will need more revenues, but, it can hardly increase substantially revenues, taking into consideration the supposed tax cuts. In other words, the federal budget is likely to face the problem of the widening gap between revenues and expenses since the latter will increase while the former will reduce substantially.

In such a situation, it is quite difficult to overcome the economic crisis because the state needs to borrow money to cover the deficit of the federal budget. Alternatively, the state can cover the growing expenses by means of monetary policies, but, in actuality, this means that the coverage of the deficit will lead to the growth of the inflation rate. The latter will destabilize the macroeconomic situation even more. On the other hand, the minimization of inflation and minimization of expenses of Americans may lead to deflation, which is also dangerous in the context of the economic crisis.

At the same time, it is important to understand that the 2009 federal stimulus plan will affect the development of the USA for years ahead because the implementation of social programs, including educational programs and health care insurance programs, will need the increase of federal budget spending and state support. Obviously, these programs will need huge funds that means that the deficit of the federal budget will persist. In such a situation, it will be difficult to overcome the economic crisis because the state needs to cut its expenses and maximize its revenues to balance the federal budget and use federal funds efficiently.

In addition, the development and implementation of numerous social programs will inevitably lead to the creation of numerous state agencies and departments, working on these programs. It proves beyond a doubt that the creation of new state agencies will lead to the increase of state expenses and bureaucratization. In such a context, it is hardly possible to speak about the efficient use of the federal budget funds.

Conclusion

Thus, taking into account all above mentioned, it is possible to conclude that the 2009 federal stimulus plan needs to be improved in order to avoid possible risks and threats which naturally emerge because of the social orientation of the plan. What is meant here is the fact that the federal stimulus plan should primarily stimulate the economic development of the USA and revival of economic activities. Consequently, the state should introduce stimulating fiscal policies to develop their business activities in the USA and minimize fiscal pressure on tax payers. At the same time, the state needs to cut federal budget expenses to use federal budget funds efficiently. In addition, this will lead to the larger investments in the national economy from the part of the business. Furthermore, the development of social programs cannot be effective if it is accompanied by bureaucratization and ineffective use of funds. This is why, it is important to minimize the number of state agencies and develop programs which involve the public control and minimal bureaucratic procedures.

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