As economic analysts continue to make heads or tails about where the American economy is heading, the various practical financial problems that the American public seems to be facing at the present places the idea of a looming recession on everyone’s minds. This report seeks to discuss the various reasons that contribute to the likelihood of a recession occurring in the immediate future by examining existing indicators and their respective values towards concluding the state of a nation’s economy.
The first aspect that this report examines is the presence of historical indicators for an eventual economic downfall for America. With several years into the Iraq war, the United States has yet to see any progress in terms of ending hostilities and taking genuine positive steps towards peaceful reconstruction. All the while, the country continues to lose money in funding troops and equipment while building more political discontent from its citizens. What is worse is that this is all happening while the price of oil is skyrocketing to record prices thereby further burdening American taxpayers who in response build the powerful public impression that there will be an impending economic crisis should the government continue to be stubborn in its persistence with the war.
The next aspect that this report examines is the universal construction of recessions as attributed to three events which are increase in interest rates, decline in consumer confidence and reduction of business output (Finance, 2007). If the current position of the American economy is examined it would be apparent that all of these events are present in varying degrees. Due to higher prices of energy, basic foodstuffs, and raw materials (Redwood, 2008), inflation rates in the United States have been steadily on an increase. Many people can hardly keep up with today’s prices and are already forced to lower down their respective daily living standards. While this has not yet translated to a significant rise in the percentage of the population below the poverty line, it nevertheless points towards that direction should the inflation rates continue to go up. The steady increase in borrowing interest rates have led to a continuing decline in consumer confidence and spending. The real estate industry in particular has seen a steady decline in the business that it generated as Americans become more and more wary about not being able to make housing payments should they undertake such responsibilities as buying a house. Lastly, reports of 17,000 layoffs in January alone completes the trifecta that substantiates “renewed questions about whether the economy is heading into recession or may already be in one” (Schoen, 2008, p. 1).
However, despite these indicators and public perceptions, there are still many in the business world who do not agree that the United States is indeed on its way to the poorhouse. Analyst, James J. of Oklahoma, claims that these individuals who are not accepting the idea of an impending recession are “wearing rose-colored glasses”. He made such a statement after explaining how the middle class continue to experience a decline in their wages and company layoffs continue to occur (Schoen, 2008). On the other hand, analyst R. Vaughn believes that a recession is not realistically imminent but could be brought about by the “doom and gloom stuff that journalists keep hammering out to the general public that do not actively get much involved in business” (Schoen, 2008). However while it cannot be denied that the left-wing media have contributed a degree of sensationalism with regard to the state of the economy, to attribute this solely to a fanning of political interest falls short of critical analysis. Though perhaps exaggerated at times, the characteristics that mark the beginnings of a recession are alive and well inside the United States today. The media cannot fabricate inflation rates, job layoffs, housing markets or high costs at the pumps that all stare the consumers in the face every day. Though they may be contributing to public fear about the state of the economy, downplaying the effects that are conclusively apparent will be equally problematic. It would be better to keep the public informed so that they may take appropriate action to protect themselves from the implications of an occurring recession. Although they may not be as informed as those who deal with business everyday, the issue is still too important for the common American not to get involved and informed with it.
In fact, even the U.S. government has been forced to accept that the conditions of an impending recession are upon the nation. As part of the tax season this year, a bill signed into effect by conservative republican president George W. Bush included a 156 billion dollar economic stimulation package (Corker, 2008) that translates to a 300 to 600 dollar check for single American tax payers and double that amount for those who are married. With these drastic measures being taken by the federal government, it is difficult to deny that an impending recession truly is upon us.
Still, it would be difficult to say with full confidence that we are in a recession. While the indicators that our economy is slipping are present, to say that they would inevitably lead us to a recession would not take into account all the possible actions that the government, the business sector, and the public can take to prevent a recession from happening. It is more appropriate to say that the conditions for a full-blown recession are all present in the current state of the U.S. economy, which implies that genuine change should be proposed, initiated, and sustained in order to avert such a disaster. Although media can influence public sentiment, it cannot control it especially when there are a number of observable phenomena in the lives of the average American that are legitimate causes for economic concern. While the debate of the recession carries on in editorials and in business forums, it will do little to change public impression given the everyday financial problems that typical Americans now have to face.