The United States Economy

The U.S economy still remains one of the largest economies in the world today despite many challenges they face domestically with the increase in transformation on the global landscape. The economy of United States comprises about 20% of the global output appearing bigger than China which is also among the top best economies globally. The per capita GDP of this country is the six highest according to the IMF reports. This economy is majorly dependent on the service sectors that include financial services, healthcare, technology and retail account to approximately 80% of the overall output. Other major contributors are the manufacturing industry that contributes about 15% and agriculture taking about 2% of this summed output. Machinery, aerospace, telecommunication are among the big industries in the manufacturing sector.

According to the United States economic growth data and reports. The protectionist policies that exist still in the economy are a risking factor in the world trade. The current projections of the GDP growth in 2018 stand at 2.7% and about 2.35 in 2019.This is according to Focus Economics reports. Research done by Abrams (178) suggests that the macroeconomic performances are a strong determinant of the outcome of the U.S presidential elections. Better performances in this measure tend to catalyze the vote of incumbents party and vice versa. Studies also predict a bigger economic growth when a Democrat president is governing compared to the Republican putting all factors at ceteris paribus. (Rogoff, and Anne, 1-16) and (Alesina, Nouriel, and Gerald, 1997).The GDP growth and the performance gap were found to be statistically large and significant.

Discussion

According to the data provided, Gross Domestic Product, Unemployment’s and inflation rate are among the three most significant pillars that are highly significant to any economy. Inflation is the general weakening of a countries currency. This is due to significant increase in prices of items and an increase in the supply of currency mainly when the government of the day prints and circulates more money into the economy. This will result in a rise in demand of commodities resulting to companies producing more which leads to an increase in GDP.This, in turn, will result in boosting of the stock market which attracts more investment due to profits. A high rise however in GDP is dangerous since it increases the level of GDP and weakens the country’s currency. The recommended percentage is about 2.5-3.5%.This will make the economy stable

Unemployment can be defined to be a state where the individuals are willing to take jobs using their current remuneration without success.The unemploymet rate is the measure of the number of unemployed individuals that is measured against the present labor force. The state of unemployment take different forms; this include, classical unemployment- where real wages are quoted above the market hence causing the number of people seeking the job to be higher than the vacancies available; Structural unemployment-where jobs are available but no individual available that have skills fit for the job; Hidden unemployment- a situation where the unemployment of potential job seekers which is not reflected in the employment statistics.

Figure 1:  United States Unemployment Scatterplot

The figure above shows the data of the unemployment rates that were experienced in the USA from 1948 to 2017.The scatterplot shows that the data points were mainly clustered to the right. This shows that there was a positive relationship behavior of this variable.1982 experienced the highest unemployment rate of 9.71% seconded by 2010 that had an unemployment rate of 9.6%.The lowest trend experienced was in 1958 the year that the unemployment rate lowered to 2.95%.In 1951 and 1952 the rates experienced also were quite low. They registered a 3.28% and 3.0% respectively. During this time, Harry S. Truman was the president of the United States that propelled this rate to go down. Throughout his term from 1945 – 1953 the highest unemployment rate registered was about 6%.President Hussein Obama who also ruled for two terms from 2009 to 2017, really ensure that unemployment rate had decreased before finishing his two terms. During his first term in office in 2009, he was able to reduce the unemployment rates of citizens of United States from a high of 9.2% and 9.6%.By 2017 when he was finishing his term this rate had reduced to around 4.35%.During the reign of Ronald Regan from 1982 to1989 a similar trend was experienced. The unemployment statistics initially were high but later lowered at the end of the two years. In 1982 the unemployment rate was at 9.7% and 5.23% after his second time in government. In general, most presidents experienced a high unemployment rate but most were able to reduce them significantly during their second term.

Consumer price index

This is a statistical estimate that measures the changes that are resultant from the level of the price of a market basket of goods and services that are bought by households in a certain country. These prices of items are collected periodically and results analyzed.This measure is important in determining the level of inflation, wages, salaries, and pensions.

This calculated by:

Consumer price index =Market Basket of the year desired/Market basket of Base year*100

Over the years since 1948, the consumer price index have been having an upward trend to date. In 1948 for the years given experienced the lowest amount of CPI of about 22.3.This has been rising for any U.S president that gets into power. The 37th president of America, Richard Milhouse Nixon who ruled between 1969 and 1974 and others the CPI rose after having a slow growth by since 1948.This led to major improvements in this trend causing the amount to start to rise up faster than initially. The year 2017 experienced the highest growth index with 240.

Figure 2: United States Consumer Price Index

The Gross Domestic Product

This is one of the indicators of a healthy economy.It is, therefore, the total value of all goods and services that are produced in a country. It involves both residents and non-residents as long as they are with the boundaries. This measure is calculated by; Consumption Expenditure Investment +Government spending plus exports –Imports.

There exists two types of GDP namely; Nominal and Real GDP.Nominal outlines the output of countries economy that does not make an adjustment for inflation. The Real GDP, on the other hand, adjusts for effects of inflation.

The United States, China, and Japan are among the top three economies with the highest GDPs worldwide. Similarly, the current GDP in the US was found to be on the upward trend since 1920 despite the presidents that took over. In the 1970s the trend of having small and almost stagnant GDPs was changed by the president Richard Milhouse Nixon. This led to rising in GDP and also consumer price index (CPI).The GDP in chained dollars and the current GDP status were found to have a similar rising trend. It is, therefore, suggesting that the U.S economy is stable. This could have been attributed to the economic policies in place despite the president that takes over power.

Figure 3: Gross Domestic Product

Different presidents came up with different policies that made major contributions to the economy. In 1964 John F Kennedy was really pushing for changes in the taxes levied on the American people. This was from 20-91% to 14-65%.Although this was not effected in his tenure his successor Lyndon Johnson experienced it in his time. This was a time when the economy of U.S had a growth rate of 6.6% and lowering of the unemployment levels to 3.8 %.

President Reagan introduced a policy to help in curbing the inflation levels in the U.S.This was because it was said to be affecting the savings of the American Citizens. The inflation rate eventually decreased to about 4.1 percent when he left office.

By the end of his two terms, Bill Clinton had assisted Americans to have a budget surplus. During his first term in office in 1993, the president was able to introduce reductions in spending levels of the government. He also introduced tax hikes. This was through the Revenue reconciliation act. This led to a budget surplus of about $236 bn.

Lastly, even after Obama took office in a midst of crises in American banks and recession in the economy, he developed an economic plan in the American Recovery and Reinvestment Act of 2009 that led to investment in different parts of the economy such as infrastructure. This led to the creation of large numbers of jobs. This, in the long run, led to the reduction in the unemployment levels to about 5.5% in his second term.

Conclusion

The study was concerned with determining the Macroeconomic Policies and Performances of any two-term U.S Presidency. From the evidence got, many presidents were able to do more in their second term. The first term helped them in getting familiar and developing a financial plan. In the unemployment rates,1982 experienced the highest unemployment rate of 9.71% seconded by 2010 that had an unemployment rate of 9.6%.The lowest trend experienced was in 1958 the year that the unemployment rate lowered to 2.95%.In 1951 and 1952 the rates experienced also were quite low. They registered a 3.28% and 3.0% respectively. Over the years since 1948, the consumer price index was found to have an upward trend to date. In 1948 for the years given experienced the lowest amount of CPI of about 22.3. The GDP in chained dollars and the current GDP status were found to have a similar rising trend. It is, therefore, suggesting that the U.S economy is stable. This could have been attributed to the economic policies in place despite the president that takes over power.

Works Cited

Abrams, Burton (2006), “How Richard Nixon Pressured Arthur Burns: Evidence from the Nixon Tapes,” Journal of Economic Perspectives, Vol. 20 (No. 4), pp. 177-188.

Alesina, Alberto, Nouriel Roubini, and Gerald D. Cohen. Political cycles and the macroeconomy. MIT press, 1997.

Rogoff, Kenneth, and Anne Sibert. "Elections and macroeconomic policy cycles." The review of economic studies 55.1 (1988): 1-16.