Government Policy

Government policy for promoting economic growth and productivity has tremendous bearing on our standards of living today and our future. Our policymakers’ ability to exercise proper fundamentals of economic growth determines the livelihood of our next generations. Whether policies encourage savings and investment, fund R&D, practice free trade, or promote education, the government has many tools and options for controlling our quality of life.

One method of boosting growth and raising standards of living is by government encouragement of savings and investment in an effort to raise capital. Unfortunately, the economic trade-off to achieve more capital requires reduced present day spending on goods and services in exchange for higher future consumption. To encourage savings, the government may consider a few principal actions: 1), raising current interest rates, thereby reducing demand for loanable funds and encouraging incentive to save, and / or 2), a tax reform intended for reduction of tax on interest income in conjunction with investment tax credits, providing incentive for greater household savings and investment by firms.

President Obama in October 2011 has already had significant economic impact. Upon going into effect, the USTR eliminated 90% of its Panama’s tariffs and the United States has since exported $8.2 billion in goods to Panama while importing $389 million in Panamanian products.

Without government encouragement for research and development, America would not live by the high standards we have today.

Reference:

Bernanke, B. (2011, May 16). Promoting research and development: The government's role. Retrieved from http://www.federalreserve.gov/newsevents/speech/bernanke20110516a.htm