The US Economy and Government: Right Questions and Wrong Answers

Since the beginning of the 2008 crisis, questions as to whether the U.S. government should shape the country’s economic policies have become a matter of public concern. The United States, as the country committed to trade liberalism, free markets, and fair competition, is growing wary of the federal government’s continuous involvement in the economy. On the one hand, the government should maintain a reasonable balance of constant oversight and non-involvement in the decisions made by market players. On the other hand, the public needs to know what the government can do if faced with an acute crisis. An emerging consensus is that the government only hurts the U.S. economy. It hinders the growth of its gross domestic product and leaves little space for the effective development of free markets. In reality, government involvement can become a positive trend in the U.S. economy if government officials consider the changing macroeconomic realities and support the most vulnerable economic sectors.

The theme of government involvement in the economy has been equally relevant at all times. Since the first years of the U.S. history, the country established itself as an active supporter of numerous economic and market freedoms, with reasonable government involvement permitted at times of serious economic crises. Meanwhile, the debate on whether federal government should regulate the national economy and to what extent it should intervene with the country’s macroeconomic affairs generated considerable political disagreement, turning into a line of divisions among liberals and conservatives. According to Boyd, conservatives tend to view government involvement in the economy as highly undesirable (223). In their opinion, the U.S. government is not capable of regulating the economy. The only thing it can accomplish is hindering the nation’s economic health through overregulation and excessive taxation, thus reducing its industrial productivity and creating unfavorable conditions for future investments (Boyd 223).

By contrast, liberals believe that “macroeconomic policies aimed at achieving an equilibrium among savings, consumption, and investment promote growth, stimulate job creation, and consequently, ameliorate unemployment and income inequality” (Boyd 223). They are confident that progressive taxation provides additional budget revenues that can be re-channeled to regulate consumer demand through public assistance and social security payments (Boyd 224). Is it that the U.S. can never achieve an optimal vision of government involvement in its economy? Cannot the U.S. government develop a single policy path that would be followed at all times? Both questions seem to be important, but even more important are possible answers. Since the U.S. economy displays considerable fluctuations and the country’s macroeconomic realities change unexpectedly, the government will have to influence and regulate the national economy. The principal question is not whether the government should intervene, but when and how such intervention should actually occur. In light of the most recent macroeconomic failures, the public is becoming less optimistic about government involvement in the economy. Still, it is wrong to believe that the government is not capable of solving the emerging economic problems effectively.

Present-day media send a message that the U.S. government is unable to deal with the financial crisis. The public believes that the government has failed to translate its decisions and actions into measurable economic growth. The Affordable Care Act generates major criticism, with economists suggesting that the new healthcare law reduces incentives for business and economic growth across the states. Mulligan says that the ACA is designed to protect vulnerable populations and provide them with the basic insurance coverage. In reality, the law has the potential to hinder business and workplace productivity since it reduces employment benefits and imposes heavy penalties on employers if they decide to expand their business (Mulligan). Boudreaux and Zywicki agree with Mulligan, suggesting that the Affordable Care Act is a combination of restrictions and bureaucratic mechanisms that have failed to achieve the desired end. The number of the uninsured has only slightly decreased from 16 to 13 percent (Boudreaux and Zywicki). Every fifth employer surveyed by the Federal Reserve Bank of Philadelphia had to optimize (read: reduce) the number of working employees under the ACA (Boudreaux and Zywicki).

It is easy to describe the devastating effects of government decisions on the nation’s economy when the most serious macroeconomic difficulties are in the past. Critics forget that, “whenever the public endures a crisis, ordinary citizens start to wonder how – and whether – our institutions really work. We no longer take things for granted. It is only then that real change becomes possible” (Shiller). Present-day economists believe that the government cannot manage the national economy, but this economy will never sustain economic growth in a totally unregulated environment. Even when the macroeconomic decisions of the U.S. government become an object of public scrutiny, they do not deny the relevance of government involvement in the nation’s economic affairs. What they emphasize is that such involvement should be timely and positive, based on a thorough consideration of the changeable macroeconomic realities.

It is not the U.S. government’s interference with the economy that poses a problem, but the quality of the decisions it made to foster economic growth and productivity. Klein is right: those who say that the U.S. government slows down the economic recovery typically mean the growing deficits and the lack of certainty in future macroeconomic policies. Nevertheless, little evidence is available to support this position (Klein). The current criticism of the government’s actions is fashionable but not reasonable, even though the quality of government decisions in the economic sector demands substantial improvements.

In summary, the topic of government involvement in the U.S. economy generates controversial responses. On the one hand, the government is severely criticized for its failure to foster measurable economic growth. On the other hand, the American economy will not sustain its growth in an entirely unregulated environment. It is not government involvement that causes disagreement, but the quality of the decisions made to improve citizens’ well-being. The emerging criticism of the U.S. government’s actions in the economic sector lacks any evidence and looks absolutely unreasonable. Apparently, federal government should retain its control over the economy to the extent that secures citizens from major financial or social losses. It is high time for the government officials to review their past decisions and consider the changeable conditions of macroeconomic performance in the U.S.

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