US Economy Recovery Strategy essay
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Krugman article highlights the current rate of economy recovery in the Obama administration. To illustrate his point, Krugman compares Obama’s recovery strategy with Reagan’s strategy back in the 1980s. This paper seeks to summarize Krugman’s main points and to concur with his notion that the government should increase its spending rate and create more jobs in order to improve the pace of economic recovery.
In his article, Krugman reports that the main reason behind the slow US economy recovery is its ever increasing household debt. He further reports that the government strategy of minimal spending is compromising the recovery rate. This is because minimal spending has negative implications on economic growth. Therefore, according to Krugman the minimal expenditure approach has defied both theoretical and previous approaches (1).
Krugman argues that expenditure at state and local government levels has drastically reduced therefore affecting federal government’s expenditure on goods and services. This has consequently affecting the level of employment and the rate at which the economy is recovering (1). To demonstrate the atrocities being committed by the Obama administration, Krugman reports that Reagan’s administration employed more people in order to reduce unemployment and to stimulate economic recovery. Further, Krugman reports that Reagan’s administration increased its purchasing power by spending more on acquisition of goods and services which is the reverse of what the Obama administration is doing towards curbing the current economic crisis (1).
Krugman argues that in order to increase the pace of economic recovery, the Obama administration needs to invest in education, infrastructure and job creation. He argues that the current strategy is impacting negatively on economic recovery and, it is also compromising on the US economic stability. He asserts that, if the Obama administration was keen on reducing unemployment and increasing spending, by now, the unemployment rate would have been reduced by more than 1.5 percent. In comparison to Reagan’s administration, this would have been a major achievement for the Obama administration (2).
Krugman recommends that, in order to improve the pace of economic recovery, states and local governments should consider creating employment by rehiring people through projects funded by low interest loans borrowed from the federal government. State and local governments should also embark on new and abandoned projects otherwise; the Obama administration strategy is doomed to fail (2).
In my own opinion, Krugman’s criticism of the current economic recovery strategy is valid. This is attributed to the fact that other critics have also voiced their opinion on the slow rate of economic recovery. For instance,OConnell argues that the current economic crisis has caused severe economic changes in the American society. This is because despite the policies and measures being put in place, unemployment rates are still very high and the recovery rate is low thus the need for the Obama administration to develop another strategy (1). Elwell also argues that more and more people are finding it hard to get jobs in the current economy with more than seven million pushed out of work due to a sluggish recovery. Accordingly, he also questions the practicality of the current cut on government expenditure as a measure to curb the financial crisis (4).
I also agree with Krugman’s assumption that the current strategy is doomed to fail. This is also supported byOConnell who laments that, based on the current recovery strategy; it is unlikely that the US economy will ever return to its economic affluence. He further asserts that unless the government increases its expenditure and investment in education and infrastructure the current recovery rate is expected to persist for a long time (1).
I also concur with Krugman that the government needs to increase its expenditure on goods and services. This will increase on revenue and tax generated therefore, improving on the Gross Domestic Product (GDP) and consequently the economy. In support of this view, Elwell agrees that there is a need to increase government spending because such a strategy would improve the tax base and reduce the deficit created by the economic crisis hence, stimulating the economy at a faster rate (5-7).