The American economy has recently been hit by several challenges, such as the sub-prime mortgage crisis as well as the great financial recession of 2008. These crises left a strain on every American household, since most citizens lost their jobs and most financial institutions such as banks were unable to lend any more for fear of default. Moreover, previous defaults had led to the collapse of some financial institutions such as banks and insurance companies. Inflation rates increased and the U.S. economy became worse; investors were afraid of investing in any of the economic sectors (Elmendorf 2).
Furthermore, the economic crisis being felt in America became international since almost all the major economies of the world use the U.S. dollar as their exchange currency. Most Americans were left jobless and prices for essential goods and services had skyrocketed. Due to defaults on mortgages, there were many foreclosures which left numerous Americans homeless. The worst situation was that most financial institutions were at the point of collapse; they could not borrow from one another or lend. These crises prompted an urgent government intervention in the form of bailouts with the Federal Reserve pumping billions of dollars into the economy. The main targets of the bailout were major corporations that were considered too important to collapse, for instance, General Motors Corporation and AIG Insurance Company. These institutions were bailed out because they employ large numbers of Americans.
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Current Economic Situation in the U.S
The U.S economy is slowly recovering from the great financial crisis experienced in the year 2007 mainly due to the mortgage crisis. To revive the economy, the government has tirelessly worked towards stabilizing the economic situation by injecting billions of dollars into the economy (U.S. G.P.O 3). This has been reflected in the budgetary allocations since the year 2008 to counter the effects of the financial crisis. However, it is common belief that the American economy is not yet out of the woods as evidenced by the slow economic growth rate and high unemployment rate. According to George (4), some of the factors leading to the slow recovery rate of the economy can be attributed to temporary factors such as high international oil prices and the European debt crisis. Additionally, the slow economic recovery rate can be attributed to the housing sector crisis that led to the economic recession in the first place (Business Wire, 23).
It is evident that the U.S economy still suffers form the financial crisis since debtors have not fully serviced the loans they owed their creditors (banks). Hence, small financial institutions such as community banks have not yet recovered from the mortgage crisis due to the low prices of the foreclosed homes and properties (George, 6). All the above factors point to a moderate recovery for the U.S economy for the time being.
Evaluation of the U.S Budgetary Allocations
From the Office of Management and Budget (par), the 2013 U.S budget is tailored to suit America’s limited resources, whereby every citizen carries out their economic responsibility and in return gets fair returns for their efforts whereas the government curbs on unnecessary spending by putting money on projects that promise huge future returns. The main budgetary targets are interrelated, for example, the adoption of clean energy sources will not only create more jobs for Americans but also cut on production costs on the part of investors. One of the major targets is the energy sector whereby America is keen to reduce its dependence on fossil fuels and instead invest in clean and renewable energy resources (Office of Management and Budget, 101). In the 2013 budget, the U.S government through the Department of Energy has set aside $27.2billion to support energy related projects (Office of Management and Budget, 101). This budgetary allocation will ensure increased funding for research especially in efficient production and use of energy as well as motivating more Americans to adopt the use of renewable energy resources. This move will put America in the forefront of clean energy producing economies that will not only save the environment but also expand existing industries and create new ones thus creating more jobs for Americans.
Moreover, the upgrading of the U.S economy into a clean energy economy will put U.S industries at an advantageous position since they will save more on energy hence cut on manufacturing costs (Office of Management and Budget, 101). Furthermore, according to the U.S Department of Energy, the 2013 budgetary allocation on energy guarantees safety and security since use of nuclear weapons in America will be reduced. National security will also be enhanced because there is increased funding to counter the use of nuclear weapons internationally.
Secondly, the 2013 budget is aimed at progressively reducing the Federal deficit to less than 3 percent by the year 2018 and this will stabilize the economy and ensure a steady growth of the GDP (Office of Management and Budget). A steady growth in America’s GDP is a guarantee to a stable economy hence a better for every American. Moreover, a favorable GDP will upgrade the living standards of Americans to that of middle class and hence every American can live the American dream. Through the new taxation policy, the 2013 budget proposal ensures that the deficit in the GDP is gradually reduced hence forecasting a stable economy in the near future.
With regards to employment and ensuring that all Americans have a source regardless of their age, the 2-13 U.S budget allocates $12billion to the department of labor with the aim of supporting training initiatives and providing resources for job seekers (Office of Management and Budget, 143). The provisions in the budget are that a new perspective in training of job seekers should be adopted; employment terms should be revised to suit the needs of incumbent employees; veterans should be incorporated in the labor market; revised terms of pensions such that employees find it easy to save up for retirement as well as ensure that the Federal pensions system does go bankrupt; and new terms regarding maternity leave dictating that workers should go on a paid leave (Office of Management and Budget, 143). Generally, the department of Labor has been empowered to invest in a competitive workforce that is protected from replacement by other workers form outside the U.S.
Critique of the 2013 U.S Budgetary Allocation
According to the budget proposal on energy, a lot of money is allocated to support adoption of clean and renewable energy resources. However, allocating such huge sums of money is contrary to the White House policy on cutting unnecessary spending. The most critical question is; why should the government spend too much money on some projects and yet it claims that there are deficits in the budget? Besides, some of these projects will take a long time to be complete. On estimation, each proposed project will take a minimum of ten years to reap the desired benefits. Moreover, some of them may not materialize.
Secondly, I tend to disagree with the proposal on stabilizing the GDP through increased taxation for higher-income earners; the government aims at taxing citizens for every dollar earned above $250, 000. It is my opinion that rich Americans are getting punished for their handwork which is against the proposal that all Americans will be treated fairly. This can also be reviewed as a reward for the lazy since this tax is redistributed to low income earners.
Moreover, injecting too much money for the training and retraining of job seekers is misplaced, since there are no industries to employ the newly trained job seekers. This money should be directed to setting up of more industries such that the job seekers are automatically absorbed in the labor market.
Following the 2007-2008 financial crisis, the U.S. budgetary allocation was totally affected, as the Federal government was forced to disperse lots of funds where it was not budgeted, such as bailing out collapsing firms among others. This paper has analyzed the U.S. 2013 budgetary allocation, the current affair and critiques of budgetary allocation. From the observation, it is clear that the main aim of the Office of Management and Budget is to allocate the budget in equitable manner to all responsible U.S. citizens. Moreover, the government will reward the citizens by funding projects, which will generate huge income to the U.S. citizens. However, there are lots of critics on budgetary allocation, where the government has been criticized on spending more funds to projects, which will take longer before getting the return. The critics argue that due to deficit in the budget, the government should invest in the projects, which have a quick return, thereby assisting in the economic recovery.