The United States Economy: Outline - Essay Example

The United s Economy: Outline The United s Economy is strong yet there are a number of problems with the economy a. Provide Example of GDP or domestic output etc. b. Provide examples of US economic growth as compared to other nations. 2. Identify that changes need to be made (Fixing tax code, fixing trade imbalance, economic policies to make domestically made products more competitive). 3. Highlight the effect that an inefficient tax code could have a. Generate potential solutions (Such as a flat tax rate) b. Provide the example of Estonia’s flat tax rate 4. Policies that can be designed to make domestically made products more competitive a. Easier energy policy (Cheaper energy makes for a lower price of finished good) b. Encourage knowledge and physical infrastructure upgrades. c. Move towards higher engineered products 5. Fixing the trade imbalance a. Highlight the effect of a trade imbalance b. Highlight steps that can be taken to fix the trade imbalance 6. Conclusion The United States Economy The United States of America is an economic powerhouse, and is the largest economy in the world. According to the CIA World Factbook (2011) it is the case that the U.S. economy has an official GDP $14.62 trillion in 2010. However, the economy of the United States is experiencing a number of challenges. Without question the recent economic downturn has had a devastating effect on the American people, and the economy as a whole. What this paper helps to do is to identify three problems affecting the American economy and provide some simple solutions to help remedy the situation. Firstly, this paper will provide a critical discussion on the effect that a cumbersome tax code has had on the U.S. economy and discuss what effect a simplification will potentially have on the U.S. business sector. Secondly this paper will discuss what effect a negative trade balance has on the American economy and what steps can be taken that could theoretically help improve the trade balance. Finally this paper will discuss some simple strategies that could be adopted by the Federal government that would help make domestically produced products more competitive, and highlight how these changes have affected other nations. According to Chan (2010) it is the case that the Chairman of the Federal Reserve, Ben Bernake identified that at present, the United States personal and corporate tax code is very inefficient. Ultimately congress could help spur economic growth by making the tax code more efficient through the closing of loopholes, making the system clearer for entities that file taxes and through streamlining of the IRS. For example if the tax code is clearer organizations would have to divert fewer resources (Man-hours) and money towards the simple filing of taxes which would allow for more physical investment in other projects. On one extreme end of the spectrum is the case of Estonia which according to the Landler (2005) has most of their population file their taxes electronically which saves fortunes in paper administrative costs (For both the revenue service and individual entity that is filing). Moreover according to Landler (205) Estonia uses a flat-tax system which would save fortunes in administrative costs. A shift in this direction could save money for organizations who could divert these savings to new projects. A second issue facing the United States is a trade imbalance. According to the CIA World Factbook (2011) in the United Sates the trade deficit reached $840 billion, $506 billion and $630 billion in the years 2008, 2009 and 2010. What this translates to ultimately is that more goods are coming in than going out. From a mercantilist viewpoint one could argue that nations should strive to have more goods going out than coming in. According to Fox (2008) the port of Savannah has been able to generate higher exports than imports and can serve as a model for other U.S. ports. Ultimately the port has had a focus on products that are highly desired by foreign nations such as frozen chicken parts, wood pulp and other ‘raw’ components. Moreover the port has taken steps to attract major domestic and international organizations to set up distribution centers in the area around the port of Savannah (Possibly by promoting cheap land for product storage). With all of this in consideration one could ask what steps could be taken to make domestically produced products and services more competitive. Unfortunately there is probably not one simple solution but rather a number of steps can be taken to ensure a more competitive landscape. For example the government could take steps to aid process that makes production cheaper. This can be achieved through changes to energy policy that makes access to energy cheaper. If organizations have access to cheaper electricity, or natural gas etc, than it would be the case that finished products would ultimately cheaper to produce, and could allow finished product to be more competitive on the world stage. This less expensive energy could be achieved through state and federal initiatives to expand domestic energy extraction (oil, natural gas, coal) or by giving tax credits to organizations that implement energy improvements in their production capabilities. A second example would be significant upgrades to domestic infrastructure. If producers are able to get their products to end users for less money, this would significantly reduce the overall production costs and ultimately reduce the costs of finished goods. This can be achieved through improvements to rail, road, air networks or reduction in direct taxes to organizations that make use of these networks. However a second approach to improving the competitiveness of American manufactured products would be through the incorporation of tax incentives that encourage organizations to make significant upgrades to their physical and knowledge infrastructure. If there are prohibitive costs associated with making improvements to production techniques (Such as taxes or environmental regulations) it may be that producers will simply avoid these upgrades. However, once there are incentives to make these changes it is likely that they will be pursued by organizations. In conclusion, there are a number of challenges facing the United States economy however it is important to consider that the United States was not created as the wealthiest nation in the world, this accomplishment was achieved through hard work and good policy. As such this position can be maintained by hard work and good policy. References Chan, S. (2010) In Interview, Bernake Backs Tax Code Shift. New York Times. [online] Available at http://www.nytimes.com/2010/12/06/business/06bernanke.html Accessed on March 20th 2011. CIA World Factbook (2011) The United States of America: Economy. [online] Available at https://www.cia.gov/library/publications/the-world-factbook/geos/us.html Accessed on March 20th 2011. Fox, J. (2008) Will Exporting Ports Fix U.S. Trade Defecit? Time Magazine. [online] Available at http://www.time.com/time/magazine/article/0,9171,1810318,00.html Accessed on March 20th 2011. Landler, M. (2005) A Land of Northern Lights, Cybercafes and the Flat Tax. New York Times. [online] Available at http://www.nytimes.com/2005/12/21/international/europe/21letter.html Accessed on March 20th 2011. Read More