United States Macroeconomics Situation, Essay Example

In assessing the current macroeconomic situation in the U.S., expansionary fiscal policy is the first example that comes to mind. Consider that “Repeated fiscal deficits have led to burgeoning levels of public indebtedness, which are presently being exacerbated by significant stimulus spending,” (The Global Competitiveness Report, 2010). Whereas there are differences of opinion regarding the effectiveness of the stimulus package, increases in government spending, for purposes associated with boosting the output of services and goods, fits within the context of the aforementioned policy. The Federal Reserve should continue its efforts of lowering the unemployment rate by enacting its easy money policy tools, supporting provision by banks to make more loans, and lowering interests rates respectively. This current macroeconomic situation has proven even divisive among professional economists. According to Dizikes (2010), the following account of Nobel Laureate Krugman’s lecture makes the case:

What has been lost above all, Krugman argued, is an appreciation of ideas developed in the 1930s — most notably the economist John Maynard Keynes’s broad view that in certain circumstances government spending is the best tool to instigate an economic recovery. At a time when interest rates are minimal and can hardly be lowered to spur private investment, Krugman argued, Keynesian thought is especially vital, despite some loud arguments to the contrary (para. 4).

In similar vein, the U.S. Congress should strive for bipartisan collaboration to support long-term financial recovery in the social realm for today’s citizenry. Just as circumstances during the great depression of the 1930s required expanded spending by the government, to prevent another depression, historical lessons can be applied. It would be wise for the Federal Reserve, the U.S. Congress, and professional economists consulted with by the government, to appreciate that the present crisis justifies governmental intervention.

References

Dizikes, Peter. (2010, Feb. 9). Nobel laureate Krugman: Dark Age of Macroeconomics is upon us. MIT news. Retrieved from http://web.mit.edu/newsoffice/2010/krugman-event.html

World Economic Forum. The global competitiveness report 2009-2010: Country Profile Highlightes [Data file]. Retrieved from http://www.weforum.org/pdf/GCR09/GCR20092010CountryHighlights.pdf