Discuss the current state of the American economy. Articulate suggestions to solve problems, addressing where the President stands in terms of his support of supply- side or demand- side economics....

Discuss the current state of the American economy. Articulate suggestions to solve problems, addressing where the President stands in terms of his support of supply- side or demand- side economics.  Finally, assess if the Stimulus package was effective.

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Ashley Kannan | Middle School Teacher | (Level 3) Distinguished Educator

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There will be much to add to this than the space that is offered here.  In the end, political ideology guides the answer to this question.  The opposition to the President would suggest that the economy is in a bad condition, while support of the President would suggest that things are doing better than before. In assessing the political realities attached to an answer about the American economy, one recognizes the challenges in answering the question.

The current state of the American economy is a challenging one.  In many regards, there is improvement.  The contraction and economic downturn that was evident in 2007 is not present today.  Production is up and there is clear evidence that there is not as much economic stagnation as there was five or six years ago:  "As of the third quarter of this year, the US is producing 5.6% more output (real GDP) than in the fourth quarter of 2007 when the Great Recession started."  More money is being generated now than at any time since the President too office:  "While the US economy was able to achieve a complete recovery from the Great Recession in terms of real GDP, and is now producing $843 billion more output than in Q4 2007, the new record level of economic output in the US is being produced with two million fewer workers than in the last quarter of 2007."

It is here where challenges exist.  The "jobless recovery" aspect of the American economy is a part of its narrative.  Growth is evident, but this is not translating into "kitchen table economics."  The unemployment rate hovers at about 7%, which has to be seen as improvement from where it was. Yet, the question that remains is whether this tells the whole story. Some argue that it is as low as this because many have stopped trying to find work that does not exist.  "Long term unemployed" are not included in the recent jobs report.  At the same time, average expenditures for families increased, while "Average hourly pay was unchanged at $24.31."  This enhances the idea that the economic recovery is not something that directly reveals itself to the middle class or those in the lower middle class.  Hourly wages are not rising, while expenditures are increasing.  The result is that the narrative on the economy is a split one. From a macroeconomic condition, improvement is evident.  Yet, in analyzing how this breaks down for those who are most in line to be economically marginalized, the narrative is not so encouraging.  It is here in which the challenges exist for political leadership.  At the same time, it is also at this point where the state of the American economy gives something for everyone to either cheer in support or critique in terms of oppose.

The President, himself, has sought to bring about unity in different economic philosophies.  The passage of the stimulus as well as the advocacy for the Affordable Care Act on economic grounds are both examples of him moving away from supply- side economics.  Both aspects of his legislation legacy reflect demand side economic philosophy.  In both, the President clearly suggests that external intervention is needed to assist the nation in economic recovery.  Rather than embrace supply side economics in reducing external intervention in the name of the "marketplace," the President argued that stimulus packages were needed, reflecting the role government plays in recovery, and that the Affordable Care Act can serve as legislation that can have long term economic benefits to sustain the economy:

As of January 1, more than 2 million people had selected a plan in the health insurance marketplace, and nearly 80 percent of those people will – thanks to the ACA – benefit from tax credits to help pay their premiums. All told, the Congressional Budget Office estimates that over the entirety of 2014, 5 million people will benefit from premium tax credits and help with cost-sharing averaging $4,700 per person.

Given how both approaches are so reflective of demand side economics, it's hard to see the President as someone who supports supply- side.  Some could argue that the stimulus plan resulted in supply- side theories in how corporations were told to use the money from stimulus plans.  The reality is that they were not given strict regulatory guidelines that dictated how money from stimulus packages were used.  This is reflective of the supply side theory which suggests that external barriers are minimized in the name of laissez- faire economics.  In this regard, the President might be seen as supportive of supply- side theories, but on the whole, his legislative record reflects more of a demand- side approach.

The demand- side approach is only enhanced with discussion of the stimulus package.  I think you can find much evidence suggesting that it did not work and counter it with an equal amount of evidence suggesting that it did.  I think that analysts agree that the stimulus assisted the economy in its time of need. It did help to create jobs and maintain stakeholders afloat through the economic contraction of 2007 and 2008.  Yet, the question that persists is whether recovery was part of the natural cycle of contraction and expansion intrinsic to capitalism, or whether the stimulus was directly responsible for the former ending in the name of the latter.  Economic assessment is driven by results.  The improvement of the economy has decreased the rage in the debates about the stimulus, something that would have intensified had the economy not shown improvement.

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user5862657 | (Level 1) Salutatorian

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t: Recommendations

  • Thanks a lot for you explanatory answer. One more question, do you really thing that the ACA will save us some money or in the end it will be worse and we will spend more? What would YOU recommend to solve problems in the american economy? Thank you again!

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