Government policies and their impacts

Government Policies

Four policies the government has created: Economic growth and productivity

Student loans

The purpose of student loans is to make education more affordable for the average American. The premise behind student loans is that students will borrow to pay their education, get a better job, and then pay off the costs of that education later in life, after they have attained financial solvency. However, this happy scenario does not always transpire. A shaky economy makes repayment of student loans far from certain. Furthermore, student loans do not level the playing field as much as one might assume. Students from wealthier backgrounds do not need to balance work and school. They can take internships over the summer to build their social networks, rather than take mindless jobs simply to pay for books and other aspects of schooling not covered by government loans. True, students can always choose to go to a state school or less competitive university at a lower cost, but it is difficult to find a 'free' education. Moreover, going to a lower-quality school can shut one out of the social networks and knowledge base of elite institutions. This contributes to the inequality manifest in America.

Instead of extending student loans, the government should offer more financial support to all universities, to reduce the price of tuition, or offer grants to students of high academic caliber. The best foreign universities in Europe and Canada are far less expensive than America's most elite institutions. By truly expanding access to education, America could become a more literate and socially equal society, and with superior knowledge the overall quality of the labor force would be improved and spur long-term productivity. Students like myself would be able to avoid the culture of debt endemic to our society early in their working lives, and could take more socially meaningful jobs upon graduation, rather than the best-paying job they could find to pay off their student loans.

Interest rates

To stimulate the economy, the Federal Reserve Bank lowers interest rates to encourage spending rather than savings. During the credit crisis and subsequent recession of 2008, the Fed lowered interest rates to historically low levels. This was supposed to help consumers with their mortgage payments, encourage consumers to purchase 'big ticket' items like cars and large appliances, and encourage businesses to hire more workers, to meet the presumably increased level of consumer demand. Of course, the Federal Reserve had been criticized for its past policies of making it so easy to borrow money that many prospective homebuyers took our complicated mortgages on homes they could ill afford. However, the economy is believed to be in such dire straits, that the Fed's current policy is seen as essential.

In terms of my own life, as I do not have a mortgage, the decline in interest rates did not affect my cost of living. I do not have a prohibitive level of credit card debt because I am worried about the state of the current economy and my future job prospects. It would seem unwise to take out a large loan for a car or other item, no matter how low the interest rate, if I might need that money for basic necessities in the near future.

However, some people might regard my decision as unwise: after all, what 'goes up, must come down,' and interest rates will inevitably go up. I may regret not borrowing now, if I have to pay a higher rate on a car payment in the future. On the other hand, given that the low interest rates and economic stimulus have not has a seismic effect on job growth, I am still wary about spending too much, despite the fact that money in a savings account with a low interest rate is actually 'losing' value, because of the inevitability of inflation. My uncertainty about borrowing for anything other than what I absolutely need (other than student loans, which is 'spending' that does not directly result in higher levels of production in enterprise and takes me out of the full-time labor force) means that the government must find more direct ways to stimulate job production, other than cutting interest rates.

Income taxes

Income taxes are another example of a government policy that has a substantial effect upon the lives of many Americans. Without an income tax, the government could not fund its most basic operations. But taxes do take funds out of the pockets of ordinary consumers, and past a certain point, they can stymie productivity.

Cutting taxes on the incomes of lower-to-middle income people is more directly simulative than cutting taxes on the wealthy. The wealthy already save a greater proportion of their income, and poorer people are more apt to use the money they receive through a tax cut to buy a purchase they have put off for a long period of time. However, conservatives tend to stress the need to cut taxes on wealthy people who will presumably invest their saved income in revenue-generating jobs.

While I hate to see the deduction of taxes from my paycheck every month, thus far, in my lifetime, no income tax deduction has been significant enough to alter my spending habits. I am more apt to look at my personal needs (such as my need for an education, reliable transportation, and the wear and tear on items I own) than seek to immediately spend government money I receive as a refund.