Critique of GDP Growth

GDP Growth, By Matt Kline
Critique, By Tyler Lackey

Matt discussed in his blog the growth rate of the United States economy in the final quarter of last year. The growth rate for our economy was 3.2 percent and it was only predicated to grow at a rate of 3.0 percent. I agree with Matt that this is great news for our country. Our country is technically out of the recession but it will take a very long time for the economy to reach the level it was at before the economic downturn even with the growth that is taking place. This is a positive start for our country, as our economy continues to grow the American people will become more confident about spending and investing their money instead of saving it worrying about if the economy is going to turn south again.

Matt also mentioned that the government needs to find a balance when it comes to spending and taxes and again I would have to agree with him. I believe the government needs to spend less and lower the tax rate for the American people and businesses. If people owe the government less that is more money in their pockets that they have to spend, if consumers have more money there is more incentive for them to spend it and that will help the economy start moving again. The same is true for businesses; lower taxes and they will have more money to spend. The extra money businesses have on hand can be used to create new jobs and hire new employees. The addition of employees to the labor force results in more people with money to spend and a decrease in the unemployment rate.

The Federal Reserve has also been working to help get the economy rolling again. One thing they can do is reduce the RRR which Matt mentioned. If banks have more money on hand they can lend to more consumers who will turn around and use the money to purchase needed goods or services. This again goes back to finding ways to put the money in the hands of the consumer, the more money they have available the more they are going to spend. Increases in the sale of goods will hopefully mean job security for the workers making those goods. Knowing that their job is safe, those workers will go out and purchase other goods. This is a revolving cycle; if consumer’s faith in the US economy is restored they will start purchasing goods and services more often hopefully leading to economic growth.