Productivity in the U. S. and What the Government Must Do John sits at home each night with his wife and two children and watches the news. He listens as experts on the economy tell him that the economy is growing and that the GDP is growing. He wonders how this can be, because he lost his job months ago and has not been able to find work since. Has the very country that John lives in moved on and left him behind? This is the question that many Americans are asking themselves, and many more will be soon.
In the 1960 s and early 90 s productivity in America increased by record amounts. The nation was prospering, people had jobs, and they were spending their money. All of this was done by simple government intervention. Now America is looking at another rise in productivity, but this time it may be a little bit different unless the government takes the proper steps. The 1960 s was a period of prosperity for the America. This was largely due to policies and the tax cuts that President Kennedy initiated at the beginning of the decade.
His tax cuts were successful in lowering unemployment, encouraging people to invest more, and making the overall economy improve. To begin a period of prosperity there must be something to start it off. A tax cut gives people an incentive to work, save, and invest. President Kennedy said, "A rising tide lifts all boats" (Garfield, 1). This is proof that the government can have a big role in the economy.
The Kennedy administration cut business taxes as well as investment taxes. This caused the Gross Domestic Product to grow by 4. 5 percent in the 60 s as compared to only 2. 4 percent from 1952 to 1960 (Garfield, 3). Many people were worried that these tax cuts would raise the deficit, which makes since because lower taxes means the government will receive less money. However this was not true.
The tax cuts increased spending and investment to much that the government's revenues increased 6. 4 percent as compared to 1. 2 percent from 1952 to 1959 (Garfield, 3). This proved that cutting the taxes can stimulate the economy enough to raise the government's budget.
This intervention by the government raised the standard of living for American citizens as well as increasing government revenue. President Bush has cut the taxes himself. However these tax cuts are far different from those of the 1960's. First Bush's tax cuts go mostly to the rich. This theory of tax cutting is called the trickle down tax effect. By cutting the taxes to the rich they are hoping they will spend the money which will then go to the middle class and trickle all the way down through society.
The problem with this theory is historically it doesn't work. Somewhere along the chain of commands the flow of money stops. This usually happens at the upper class level. This form of tax cut hurts the economy and also decreases government spending. This is a perfect example of how the government can try to help out the economy, but actually hurt it.
As more companies go overseas America loses jobs. This however may not be the biggest problem. In today's society the average worker is more educated and therefore more productive. He can do more work than the average worker could do a decade ago.
Also with technology machines and computers make it possible for one man to do the work it used to take ten or more men to do. This is creating less of a supply of jobs and in turn causes unemployment to go up. If this happens the government will lose money. The government must find a way to supply more jobs to the citizens of America. If this does not happen soon the economy could crash and many American's may be going to another country to find work instead of others coming to America to find work. The increase in productivity will be different from the 1960 s, because technology is making it so that fewer workers are needed.
In the 1960 s people had jobs. Unemployment is at records highs now and may not drop anytime soon. It is true that the economy is growing and America seems to be doing well, but it is leaving many of its citizens behind. As each person becomes more productive fewer workers are needed.
This is especially true when a majority of the increase in productivity is due to technological breakthroughs and a higher educated work force. So even though the productivity level in America will rise along with the GDP many people like John will be left behind. The government must do something to help out this situation. If the tax cuts are done right and many programs have their budgets redone then the government may be able to do something. The creation of new social programs would not only make America a better country, but it could create many new jobs. It is up to the government to also assist corporations so they can compete on the foreign market.
Other governments such as Japan are known to help out their industries. If the government aids American corporations then they will stop going overseas and they will also be able to produce more and for less. This will enable them to spend more money on hiring. Another step the government could take is to distribute health care.
By doing this companies wouldn't have to pay for their employees' health care and this would save them a lot of money and in turn they would be able to hire more people. It is important for America to prosper and to continue to grow. The government can issue tax cuts and lower the interest rates to boost the economy. Businesses can spend more on technology to make their products cheaper to make and raise productivity. Lastly the average consumer can spend more to stimulate the economy. Without each piece of the puzzle it is hard for and economy to prosper.
It does however seem that unlike the 1960 s this time the prosperity of the nation will come at the expense of many of its citizens who are unable to find work unless the government can do something to help the country prosper and provide more jobs at the same time. Ross HolmanGovernmentMarch 3, 2004 Works Cited Garfield, Reed. Taxes and Long-Term Economic Growth. http: web 1 May 2004. PBS.
News Hour Extra: America's booming Economy. web February 7, 2000. 4 May 2004.