Corrosive Political Conflict is Holding Back US Growth - Essay Example

All these together create building blocks for a methodology to comprehend social change along with styles of development. The enactment of one must affect the other. There is a worldwide agreement that politics matter a lot in developing countries which implies that the study of “Political Economy” plays a crucial role in economic development. Political goodwill and stability are the vital prerequisites for any government to understand socio-economic and political growth along with development.

Political instability brings ambiguity in the future economic policies of a country and deleteriously affects investors. Political stability and economic progress must be determined jointly and must necessarily remain bedfellows. Mark Zandi is one of the foremost economists of Moody’s Analytics where he performs economic-based research. Moreover, Dr. Zandi is the co-founder of economy.com. Dr. Zandi’s research primarily involves financial market, macroeconomics, and public policy reforms. Dr.

Zandi has defined the economic impact of various governments expenditure policies as well as tax systems and has also evaluated numerous monetary policies (Moody's Analytics, Inc. “Mark Zandi | Chief Economist, Moody's Analytics”). . Zandi (Tracy, “‘Corrosive’ Political Conflict Is Holding Back U.S. Growth”). A brief government shutdown lasting for 2 or three days is capable enough to create a modest impact in reducing real Gross Domestic Product (GDP) growth by 0.2%. If it continues for two or three weeks “significant economic damage” will be the result and the GDP cut would be 1.4%. Economic growth diminished noticeably during the shutdown of about three weeks in late 1995 and in early 1996 (Newsmax Media, Inc.

“Moody's Zandi: Prolonged Gov. Shutdown 'would likely bring another Recession”). In this regard, it is determined the US Congress failed to sanction legislation appropriating funds for the year 2014 which is considered to be the main reason behind the US government shutdown. Social security along with Medicare are not entirely self-funded like Federal Reserve System but partly self-funded and subjected to administrative shut-down along with failure if the government becomes unsuccessful to meet the financial obligation.

The 16 days long US shutdown in October 2013 was the third lengthiest government shutdown. Around 700,000 thousand federal workers had been indeterminately furloughed after arising of the deadlock between Democrats and Republicans. NASA was completely closed and passport applications, as well as cheques, remained unprocessed (Telegraph Media Group Limited. “US Government Shuts Down As Congress Misses Deadline”). During the October 2013 shutdown Congress was trying for a temporary conciliation to raise the US borrowing limit to reopen the government.

The Congress was intending to maintain the compromise till the market fall sharply.