Current macroeconomic conditions in the U.S. economy and policy responses

¶ … Macroeconomic Trends in the United States

The corner appears to have been turned after the subprime mortgage meltdown and the Great Recession of 2008 that followed. Despite this economic downturn, though, the U.S. economy is well on its way to recovering to pre-recession levels, inflation is at manageable levels and the nation's unemployment level continues to improve. The economic policies and stimulus monies that were used by the current executive administration to help the economy recover have done their job and the Great Recession was not as long or as severe as it would have been otherwise. To determine if these assertions are accurate and timely, this paper provides a review of the relevant literature concerning current macroeconomic trends in the United States, followed by a summary of the research in the conclusion.

Review and Discussion

It may be too soon for a celebration, but it is may be safe to start planning for one if some macroeconomic indicators are used. Current macroeconomic data concerning GDP growth in the United States indicate an economic recovery is underway. After all, U.S. per capita income is among the highest in the world at $49,000, and this level has actually increased modestly in recent years despite the severe economic downturn that occurred during this period. In fact, even during the immediate aftermath of the Great Recession, Americans managed to increase their gross domestic product from $47,400 in 2009 to $48,500 in 2010 to $49,000 by 2011 (United States economy, 2012). Notwithstanding fluctuating oil prices, the inflation rate in the United States remains low at 1.4% in July 2012 (Inflation rate, 2012).

Despite these positive macroeconomic indicators, the Great Recession, together with fluctuating oil prices, resulted in decreased demand for U.S. products abroad, and the U.S. trade deficit decreased during this period, but the trade deficit increased as a concomitant of increases in oil prices took place in 2009 and 2010 (United States economy, 2012). These trade deficits, together with enormous amounts of federal stimulus package funds, have created equally enormous U.S. federal government budget deficits. For instance, according to Schultz and Sullivan (2011), "The U.S. federal government budget deficit is at an alarmingly high level. Federal spending has exceeded revenues by well over $1 trillion per year since 2009" (p. 119). Moreover, the amount of public debt nearly doubled during this brief period of time, increasing from a 40-year average of 37% of GDP to 70% of GDP by end of this year 2010 (Schultz & Sullivan, 2011).

In addition, two expensive shooting wars in the Middle East have added another trillion dollars in debt to the federal budget (United States economy, 2012) and it is clear the American public will be paying for the global war on terror for several generations to come, but they are going to need some more jobs if they are going to do so. Today, two out of every ten American males remain unemployed and unemployment rates for females are also high at 14.9% for a total unemployment rate of 17.6% (United States economy, 2012). To his credit, President Obama's seemingly profligate monetary policies may have prevented the Great Recession from becoming another Great Depression, and his administration inherited some of the misery. In this regard, Schultz and Sullivan add that, "Although the spike in federal deficits and outstanding debt is partly a consequence of the monetary policies adopted to counteract the recent recession, these statistics also reflect an imbalance between spending and revenues that predated the downturn in the U.S. economy" (p. 119).