Us Economy


Us Economy Essay, Research Paper


How easy is it for smaller business men to achieve the Aamerican dream. How to stop

corporate domination. The question I pose to you is ” Is the American Dream still

achievable?” The opportunity is there but for what select few is the opportunity

available to. If the resources are out there but I can’t tap into the resources they rae of

no use to me. (Make note of the fact that we live in a market economy.


Just about every definition of the “market” in the dictionary connotes an oppurtunity

as a place where goods are bought and sold.(cite dict.) As an abstraction, a market is

the possibility of sale. Goods “find a market”, and we say there is is a market for a

service or commodity when there is a demand for it, which means it can and will be

sold. Markets are opened to those who want to sell and a convenience for those

looking to purchase.(cite 2) The market represents “conditions as regards, opportunity

for, buying and selling”.(cite 2) The market implies offering and choice. The way a

market economy works is that there are market pressures that develop for different

commodities. The pressures work in one direction for a while, but at the same time

pressures are budding that work in the opposite direction. As people look forward

and see there’s going to be some profit made from their production, they’ll make

decisions to increase volume, usually hiring more people, buying more materials, often

bidding up their prices. When people are competing in the same market, that tends to

generate more and more pressure in the direction of expansion. But at the same time,

as costs and possibly interest rates rise, pressures begin to operate in the other

direction, against profits.(cite 1) The public as a whole must get their fair share of the

benefits. Macroeconomic reforms should translate into a more efficient delivery of

public services, equity, social welfare and social security.(cite 3)

The Economic Policy Institute (EPI) has released its findings on American living

standards. The report, issued every other year on a decline that begsn in the

late-1970’s. The EPI’s report also contends that the Americans are working more for

less money because of slow growth in wages since 1989. According to the report,

wages in the bottom 80% of men have declined since 1989. The report also contends

that 20% of women have experienced a decline in trsl esgrd dincr the 1980’s, a period

in which wages fell but family income increased because of longer hours at work and

increased participation of women in the workforce. Critics assert that the report

wrongly focuses on declining wages as a gauge to the income of the American family.

Such critics find spending a more appropriate means by which to measure

income.(cite 4) One proposal would birng back the 10% income deduction for

second earners that was eliminated in the Tax Reform Act of 1986.(cite 5) Under that

rule, a couple with two earners can deduct from taxable income 10 percent of the

earnings of the spouse with the lower earnings(generally, the wife) up to 30,000 of

earnings.(cite 5) Since almost all married working women earn less than 30,000, this

is equivalent to a 10 percent reduction in the wife’s marginal tax rate.(cite 5) To get a

sense of how substansial this offset would be, consider a typical middle-class two

earner couple. The husband earns 45,000 per year, and the wife earns $15,000 per

year by working 1,000 hours at $15 per hour. They pay tax at a marginal income tax

rate of 28 percent plus a payroll tax of 7.65 percent.(cite 5) They also pay at a typical

state income tax rate of 5 percent.(cite 5) As a result, the wife’s $15 per hour wage

produces only a net of $8.90 per hour.(cite 5) If she didn’t change her work, the

deduction would reduce her taxable earnings from $15,000 to $13,500.(cite 5) With

a marginal income tac rate of 28 percent, that would cut her tax payments by 420 per

year.(cite 5) That’s how the current method of revenue estimation would evaluate the

revenue effect of the deduction, a $420 revenue loss. But the 10 percent cut in her

effective marginal income tax rate (which would result from deducting 10 percent of

her earnings from taxable income) would raise her net hourly take-home by a little less

than 5 percent, from $8.90 per hour to $9.32 per hour.(cite 5) Statistical studies of

the labor supply of married women imply that a 5 percent increse in their net wages

would increase the average hours worked by about 2 percent. In the current example,

the wife would increase her work from 1,000 hours per year to 1,020 hours. The

extra hours would raise her pretax earnings by $300. She would pay an additional

$46 in Social Security payroll taxes.(cite 5) The tax payments reduce the revenue cost

from the “static” $420 to $298.(cite 5) In addition to increasing the average number of

hours worked by married working women, the lower marginal tax rate for married

women would also encourage more married women to work. That increase in their

labor force participation rate would mean more revenue to the Treasury.(cite 5)

More has to be done in our economy to ensure that all business owners have an

equal opportunity to be chosen for gavernment contracts. Investigators have

suggested that government contracts are awarded to insider’s companies instead of

other, better qualified applicants. Therefore calling for a review of the application

procedure due to the favortism shown to those with inside contacts and extensive legal

support.(cite 6)

The United States Treasury announced its plan to issue a new kind of Government

bond that would protect the average investors from inflation while helpng the

Government finance the national debt. The new bonds will offer returns that fluxuate in

relation to inflation. They will be backed by the Government and priced so

unexpected inflation will not erode their value. The new bonds are a way for the

Government to tap into the $675 billion 401(k) market.(cite 7) The Congressional

Budget Office says Clinton’s 5-year budget package cuts any addition to the federal

debt by $433 billion by 1998.(cite 9) The deficit reduction estimates for fiscal 1994

vary from $102 billion from the Whitehouse to the Congressional Budget Office figure

of $83 billion provided in deficit reduction in the Fiscal year 1994.(cite 9) A number

of factors have helped including the growing economy with low interest rates and

inflation which has reduced the annual deficit by cutting interest cost on the ferderal

debt. The econommy has also helped by reducing the boosts to indexed Social

Security, boosting revenues, and by cutting the costs projected for the savings and

loan bailout.(cite 9) This report is backed up by more recent findings by the Treasury

department that the Federal budget deficit fell in the fiscal year ending in Sept. 1995,

due to the fact that revenue rose more than spending.(cite 8) The deficit was $163.81

billion. This is down from $203.1 billion in Fiscal 1994. The deficit is the smallest it

has been since 1989. Revenues for Fiscal 1995 rose to $1.351 trillion, up from

$1.257 trillion in Fiscal 1994, while outlays rose to $1.514 trillion, up from $1.461

trillion in Fiscal 1994.(cite 8)

Another sign of economic progress is the more recent rise of the Dow Jones. The

New York based company began in 1881 as Charles Henry Dow and his partner

Edward Jones invented a way of measuring the industrial average by which investors

could make their money. The first index was created on May 26,1896, based on 12

smokestack firms, with the indicator closing at 40.94. After the crash of 1929, the

World War II pushed the index up to 192.91 in 1945, with the index reaching the

5,000 mark on November 21, 1995. A record high of 5,778 was recorded on May

22. 1996, rising 13% in the first half on 1996.(cite 10).

Macroeconomists between the early 1980’s and early 1990’s have tried to develop

a new kind of model that can be applied to policymaking. This type of model could

help determine policies related to deficit reduction. This rational expectation approach

offers an alternative to the Keynesian approach, but more research in areas such as

forecasting and credibilty is needed. New Keynesian models and real business cycle

models have evolved from the rational expectaions model.(cite 13) The lack of

representation of macroeconomists among Nobel Prize winners since 1987 reflects

the disorganized state of macroeconomics. Macroeconomists have focused more on

mathematical theories than real world applications, and they have been unable to

explain fluctuations in the business cycle.(cite 12)The most popular theory for

economic growth seems to be a change in the approach and interpretation of our

economy. Th reason for this seems to be the fact that the problem with today’s

economy stems from the economist.(cite ) A common thread unites the research on

the politics of macroeconomic policy, policy substitutability, the use of different policy

instruments to affect the same goal is implicitly denied. Yet, economic theory indicates

that policymakers have multiple policy instruments at their disposal that can be used

alternately or in some combination to manipulate their economies.(cite 11) Another

problem is that elite economists, including Nobel Prize and John Bates Clark medal

winners, have had their papers rejected by journals for reasons ranging from excessive

mathematical analysis to using sexist language.(cite 13) Some of the rejected papers

have later been hailed as classics and accepted by other journals. We as a society

need to give these theories a better look in hopes of finding a better path to economic



What is possible today may not be possible tommorrow in our economy because it is

forever changing and with that change comes comes unexpected profit and loss that

can’t be predicted. The fate of the American economy is virtually impossible to predict

but by using past examples we can attempt to find ways to stir up economic growth

and find a path to economic stability. (The truth is that in our society we can never

really say that you can no longer achieve the American Dream because our economy

is forever changing and as long as that holds true their is hope


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