The average growth of the United States Gross domestic Product has been 3.25% from 1948 up to 2011 with the highest growth rate ever achieved value of 13.40% in 1950 and the lowest of -5.00% in 2009. The decade average growth rate for the decade between 1960 and 1970, known as the decade of economic boom was 4.44% and the growth rate for the subsequent decades have not fallen below 3.0%. But the decade between 2000 to 2010 has seen the worst decade average rate of 1.82%. There are several factors that led to the slow gross domestic product growth rate in the last decade. Even though the national debt started rising during the mid 1970s recession period, it became exacerbated from the late 1990s and by mid 2010 stood at $ 52.28 trillion, meaning that the ratio of the national debt to the gross domestic product was a whopping 359%, a figure higher than that of 1933s great depression years.

The period between 2001 and 2006 saw the price of oil increasing two fold and the sub-prime mortgage crisis resulting in a negative economic impact. The global economic recession, major problems in investment banking, real estate sector falling in to a crisis, and stretched credit led to the gross domestic product shrinking from mid-2008 until the third quarter of 2009. From 2009 to 2010 again high oil prices and the global economic recession affected the U.S gross domestic product and balance of trade negatively while increasing inflation and decreasing domestic demand. In response to these trends, the U.S government instituted policies and laws aimed and returning the economy on to the right track such as tax cuts, fiscal stimulus programs and bills aimed at improving the financial systems.

The GDP growth rate of 1.5% in the first three quarters of 2011, growth rate of 1.8% in the final quarter of 2011 and a value of 2.1% in the first quarter of 2012 indicate that the economy is rallying though at a slow pace. The increase in the growth of the United States gross domestic product in the last quarter of 2011 and the first quarter of 2012 can be credited to direct foreign and local investments, consumer expenditure and exports even though there was an increase in imports and government expenditure. Up to the first quarter of 2012, the urban consumer price index rose by 0.3% after rising 0.4% in February which is a good indication in terms of inflation, unemployment rate dropped slightly to 8.2% with 120,000 new jobs created while the federal reserve was to be maintained at between 0 to 0.25% in order to promote growth. "The U.S. economy has recently grown at a rate some observers consider to be necessary for the economy to sustain itself, but not enough to really pull the United States out of the recent recession and to reduce the persistently high U.S. unemployment rate." (Council for Economic Education, 2012.).

A sustained and substantial increase in the U.S Gross Domestic Product (GDP) will therefore require strong economic growth and since government policies and institutional changes are key elements that affect economic performance and versatility, it is imperative that these key elements are looked at closely with the aim of reviewing the existing ones, and crafting and executing new ones in a way that promotes the overall rate of rise of the Gross Domestic Product.

Feb 9, 2018 in Analysis Category