Labor market Essay Example | Topics and Well Written Essays - 1000 words

Labor market - Essay Example Comparatively, the poor performance of the US economy to inflation displays a high fight against recession, which results in an increase in unemployment levels. This paper will review why the labor market is doing unfavorably, due to poor fiscal policy. Since the 1930s, the growth of the government was accompanied by an enlargement of government spending. In those years, government spending made up about 3.3% of the national GDP. By 1944, the figure rose to about 44% before it fell to 11.6% in 1948. In 1883, it stood at 24%, and it was lower  than this figure  at 21%  in  1999 (Conte and Karr). This policy area entails fiscal policy, which entails the president’s proposal of a budget, which is split into different areas, including health, defense, transport and health services, among others. The main source of the funds allocated to the budget process is the tax collected from citizens, which approximated 48% of the federal revenues of the economy in 1999. Local govern ment authorities collect their revenues from property taxes (Conte and Karr). During the 1930s, the US government was getting out of the Great Depression. Therefore, it began to employing the fiscal policy to pursue social policies or in supporting its affairs, and to promote economic stability and growth (Popper). During the 1930s, people lacked enough income to purchase all the outputs from the economy, which resulted to the reduction of prices and bankruptcy of companies. With the increase in the number of companies suffering from bankruptcy, more and more people lost employment, which lead to further failure of companies (Conte and Karr). During the 1960s, the government rechanneled funds into government spending programs, which pushed consumption beyond what could be produced by the economy. Soon, prices and wages increased in an acute manner ending with a situation of inflation. However, the government did not control the increasing inflation. Therefore, during the 1970s, the economy suffered from an acute rise in the prices of food and those of oil resources. As a result, the government resolved to contain the high inflation, through raising taxes and through the reduction of national spending. The strategies employed to contain inflation failed to be effective with inflation and unemployment rising to uncontrolled levels, which led to a situation referred as stagflation in which deficits characterized the US economy (Popper). During the 1980s, these deficits increased despite President Reagan’s use of programs that aimed at increase national spending and cutting tax levels. As of 1986, the deficit had escalated to USD 221,000 million, which was about 22 % percent of the total spending of the economy. The high deficits made the conception of tax policies or increased spending unthinkable policy strategies. Starting with the 1980s, reducing the deficit was the key outlook of the economy’s fiscal policy. The years that followed were characte rized by the expansion of technology and trade with stimulation of economic growth appearing unnecessary. By 1998, the economy had changed to reflect a surplus, which led to fears that it would undergo major budget challenges (Conte and Karr). Despite the fact that the budget process was a very important process, the function of managing the American economy became very important. In general, it shifted from the outlook of fiscal policy towards monetary policy. For this role, the Federal Reserve System played a key role,