English IV
C. Srygley
12 October 2010
Recession
“The recession is twice as bad, economic growth two times as bad (Economy Worse, State-Run Media Claims It's "Better Than Expected").” A recession is “a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real gross domestic product, real income, employment, industrial production and wholesale-retail sales (What Causes a Recession?).” America is in a recession, the economy is suffering, and many are dealing with great loss because of several factors including unpaid loans, unemployment rate, and too many high taxes. The American government needs to cut taxes and become more economically efficient in order to help the Americans by creating jobs which will allow them to have more money to pay their loans.
One cause of the recession is the American homeowner. Many want houses that cost more than they can afford and receive loans from banks. Most of the recession is caused by these homeowners. Americans, who spend so much of their savings and credit to buy a house, lease housing, as well as those receiving loans, are detriments to our economy (Did Homeowners Cause The Great Recession?). During the past decade, there have been low interest rates and no money down on homes, causing more individuals to purchase houses out of a manageable price range. Since housing prices were increasing greatly from 2001 to 2006, most of those who received a loan believed they could sell their homes at a higher price in the future, pay back their loan, and make a profit. It wasn’t long until many homeowners realized there was no profit to be made by selling their home for less than their loan amount. Many quit paying on their loans, leading to foreclosure, and a loss of bank money. Foreclosed homes went on the market and added to the supply of housing throughout America. Prices of houses went down as a result and the cycle continues.
America’s increasingly high unemployment rate contributes to the recession as well. The housing crisis caused many lenders to go bankrupt. Many companies went out of business and the employees filed for unemployment benefits. Unemployment benefits were considerably less than the wages. As a result, the unemployed could not purchase as many products and services as working individuals could. This tremendous slowdown in retail sales caused many retailers and service providers to reduce their workforces due to the reduction in sales. Unfortunately, this also lead to a decrease in manufacturing growth (Career Information Center).
High taxes deter American employers from creating jobs and causes Americans to have less money which means less people paying back their loans. “In February, Congress passed a $170 billion tax rebate meant to stimulate the economy. But that only boosted Gross Domestic Product during the second quarter (Causes of Economic Recession).” “As investors become convinced that the recession is ending, they start to become more liberal in investment (Causes of Economic Recession).” However, high interest rates limit the amount of money invested. The Federal Reserve raised interest rates because the economy started to boom in 2004.
Unfortunately, there is no way to fix the recession; however there are several ways to lessen of an economic impact on society. Banks should create stricter policies for granting loans. If the person who got the loan does not have enough money to pay back the loan, then he or she would need to sell the home to ensure payment. Tax penalties levied against productive economic behavior, a flat tax would spur increased work, saving, and investment. Even if long-term growth rose by as little as 0.5 percent, the average family of four's income after 10 years would be as much as $5,000 higher than it would be under current tax laws.” (Jobs, Growth, Freedom, and Fairness: Why America Needs a Flat Tax). Tax cuts would encourage entrepreneurs to start new businesses. Currently, there are about 7 million Americans out of work, living off of savings, insurance, food stamps, loans, etc... More businesses mean more jobs and more jobs—less unemployment. The tremendous cuts in unemployment compensation may even allow for raises across the borders. The increase in employment also means more money given to the government and less taken away. (Economic Recovery: How Best to End the Recession) Of course there is an economically friendly treatment to the recession. Improvements to the energy situation would help lower the cost for gas, as well as other necessities. More fuel-efficient cars, nuclear power plants, solar energies, and wind energy would create jobs and drive the price of gasoline down, which would give people a chance to go traveling (Career Information Center).
America’s recession is the result of many factors but was primarily due to unpaid loans, high unemployment rates, and too many high taxes. The fewer taxes we have, the more businesses there will be to create new jobs, and workers will be able to contribute to the economy rather than take from it. Banks need to raise the standards for receive loans. A more environmentally friendly economy would definitely help the economy now and in the long run. The economy needs your help, so start now.
Works Cited
Career Information Center. New York: MacMillan Reference Books, 2006. Print.
"Causes of Economic Recession - Why Our Economy Is in a Recession Now - Causes of 2001 Recession." US Economy and Business - US Economic Indicators - US Economic News. Web. 22 Sept. 2009
"Did Homeowners Cause The Great Recession? - Forbes.com." Forbes.com - Business News, Financial News, Stock Market Analysis, Technology & Global Headline News. Web. 23 Sept. 2009
"Economic Recovery: How Best to End the Recession." The Heritage Foundation - Conservative Policy Research and Analysis. Web. 22 Sept. 2009.
"Economy Worse, State-Run Media Claims It's "Better Than Expected"" RushLimbaugh.com Home. Web. 22 Sept. 2009.
"What causes a recession?" Welcome to Investopedia.com. Web. 22 Sept. 2009.
"Why is our economy in a recession? 10 Causes of Economic Recession | MoreBusiness.com." Start a business with our business plans, sample contracts and expert advice | MoreBusiness.com. Web. 22 Sept. 2009.
