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White House Upbeat about Economic Growth - Essay Example

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In the paper “White House Upbeat About Economic Growth,” the author discusses government forecasts, issued in June 2006, which predicted that economic growth was sound and would increase, and that unemployment figures would drop during the year…
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White House Upbeat about Economic Growth
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These involved macroeconomic theories and the article examined the economic growth figures and forecasts in order to determine the state of the economy, using GDP as a measure of that. In other words, the production and consumption-based US economy was looking 'solid', suggesting a better standard of living for the population. But the unemployment figures of 4.7 percent and due to rise in the following year that was also discussed, meant that not everybody would benefit from expansion. Linked to the period of prosperity indicated by the GDP forecasts, was a rise of 3.0 percent in inflations, suggesting a cost-push inflation model, due to increases in producer's costs, in this case, attributable to rises in energy prices.
3. Policy Recommendations: To combat inflation and reduce unemployment, government intervention is required. This could include cuts in taxation, government spending, for example on armed forces and conflict involvement, a drain on any economy, and more investment in education, training, and technological advancement. To combat inflation, a central monetary policy, keeping down interest rates and wage rises should be applied. In addition, an examination of the unemployment situation might prove beneficial in determining causes; is frictional unemployment the problem, or is it structural In the latter case, training and financial incentives for relocation might help. It may be cyclical, where the level of demand in the economy will not support full employment. If the benefits forecast by exponential methods are to be realized, and sustainable growth achieved, then these issues need to be addressed. Energy prices have risen globally, so ways should be sought to combat the use of fuels, such as a campaign promoting 'green' issues and energy conservation.
4. Expected Outcome: The principles involved in applying the recommendations hark back to the old fashioned Keynesian model, as in "General Theory of Employment, Interest, and Money" (J. M. Keynes, 1936). The endogenous growth theory is also applicable here as it includes the concept of human capital. By increasing skills and knowledge, investing in training, education and technology, then growth should be sustainable, unemployment reduced and inflation lowered, though Okun's Law considers that in order to lower inflation, unemployment would rise. But by investing in education and equipping the workforce with the means to sustain growth, then the GDP forecasts would really mean a better standard of living for the population. With better training, education, and mobility, the greater output would result, supporting sustainable growth. Energy use would be reduced, therefore price rises would have less impact, creating a need for less personal spending, and positively affecting global warming. Thus the macroeconomics of one large nation has significance for the rest of the world. Read More
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