Government’s
Role in Economics
Because the United States has a market
economy, consumers and producers make many decisions about
what goods are manufactured and what services are available.
The government does, however, have a powerful effect on
the economy in four areas.
-
Stabilization and Growth — The
federal government “guides the overall pace of
economic activity,” according to the U.S. Department
of State. The government attempts to have a steady
growth
of the
economy by keeping a high level of employment and
price stability. The government can cut taxes which,
in turn,
increases spending. The goal is to keep the inflation
rate, or the increase in overall prices, low.
-
Regulation
and Control — The federal government
regulates businesses directly and indirectly. Directly,
the government can regulate monopolies. For example,
regulations have been put on utility companies
to keep the companies
from raising prices to achieve unreasonable profits
for the companies. Antitrust laws prohibit mergers
that would
limit competition. The government has control over
private companies to make sure that public health
and safety are
maintained. There is a fine line between government
control and individual freedom.
-
Direct Services and
Direct Assistance — Some
examples of direct services from the federal government
include
national defense, research on new products and
programs to provide workplace skills. State governments
are
responsible for highways and support of public
schools. Local government
services include police and fire and support of
schools.
Some examples of direct assistance include low-cost
loans to businesses, Social Security (which is a
tax on employers
and employees to support retirement benefits for
older Americans), Medicaid for low-income families,
food stamps
and welfare programs.
-
Equal Opportunities — The
federal government has introduced many anti-poverty
efforts. The government
sets
a minimum amount of income necessary for basic
subsistence and provides help for those who fall below
this level.
The market economy does not, however, ensure equal
goods and services for all. Wages paid, education,
entrepreneurship,
creativity, etc., all play a part in a person’s ability
to earn an income. Despite the general prosperity of Americans,
there are still significant portions of the population
that are considered to be “living in poverty.”
Source:
Department of State at http://usinfo.state.gov |
