Overview. U.S.: Economy and Budget Policy
Donald Trump’s goal to trim the national debt in eight years requires huge slashing federal spending, but there are nо plans to cut Social Security or Medicare – the main drivers of federal spending; and Trump’s proposed income tax cuts, additional military and infrastructure spending may significantly increase in the nearest future the budget deficit and national debt relative to a 2016 baseline. The possible consequences of the new budget priorities are examined by the authors in view of stimulating economic growth, increasing (or cutting) budget deficit, consumption, government social guarantees, the perspectives of the national debt. New policies are being compared with the previous periods when the government was running annual budget deficit.
The basic algorithm of the “skinny” version of the federal budget for FY 2018, submitted by the Trump administration in mid-March 2017, is analyzed in the Chapter 1. It points to the unprecedented nature of the planned changes in the structure of budget priorities, which involve the growth of direct and indirect military expenditures. This kind of approach to changing budget priorities is due to the tight constraints imposed by growing budget deficits, the rapidly growing gross debt of the federal government and net interest payments on it. A general conclusion is drawn that there is a significant political and macroeconomic uncertainty in the implementation of the basic algorithm for changing US budget priorities announced by the Trump administration.
Social expenditures trends with focus on human resources – the area in which the federal government has significant responsibilities – are being examined in the Chapter 2. Fundamental demographic changes in US are analyzed, which have been leading not only to record budget spending but also shifting the electorate and as a result – American politics; with wide gaps between the generations on key social, economic, political issues. The analysis of the federal pension benefits in lowering poverty is provided.
Government policy supporting R&D in US is analyzed in the Chapter 3. It is pointed that implementing effective national policies in science and technology is critically important for national competitiveness. The significance of developing innovative products and services and bringing innovative technology products and services to market are in focus along with the government role in developing research projects and commercialization of their results. Government supporting small businesses’ R&D is of special attention, taking into consideration that implementing effective national policies in this field is more than ever critical in today’s highly interconnected global economy. In view of President Trump’s budget proposals to make cuts across many state programs, including financing the National Institutes of Health and certain programs to train health professionals, funding of these Institutes is analyzed.
The dynamics of national debt is reviewed in the Chapter 4 with focus on main trends in financing the federal debt, pointing out its structure. The US public debt as a share of GDP is much less than in many countries, but its volume is near 20 trln. doll. It may be classified by marketable and non- marketable securities. So, any debt reduction plan should focus on expanding growth and reducing the debt-to-GDP ratio, both by increasing economic growth and reducing spending.
Education as a Competitiveness Factor in the Labor Market is analyzed in the Chapter 5. Education issues have been the focus of attention for the US establishment under any administration. At the beginning of the XXI century the problems associated with the development of the higher education system, its quality and accessibility, became more acute. The study of education in the USA shows the diversity of terms, forms and methods of instruction for different population groups provided by public and private educational institutions. Despite the predominance of private funding of higher education, public funding, including student grants and loans, has been widely developed. At the same time, there is such a problem as a huge student loan debt. One of the main tasks set by the US government in the second decade in the field of education was to give all Americans the opportunity to reach their potential. Higher levels of educational attainment generally result in labor productivity growth and competitiveness increase. President Trump’s administration faces the challenge of restoring America’s position as the country with the highest share of young people graduating from college by 2020.
Social assistance programs are examined in the Chapter 6 in view of increasing employment of recipients. The Chapter 7 considers the problems of youth employment, mainly after global crisis; focusing on main trends and factors which influence unemployment rates among different age groups. The trend of declining the share of youth in the labor force remains one of the problems in past global crisis years along with the adaptation to the changing requirements of the market, the conditions of international competition. No less relevant today and in the coming years, there will be problems of part-time, informal youth employment. Growing number of young people who found jobs, quality of these jobs was below expectations. In addition, when they lose their job, remain unemployed for a longer period of time, than at the age-groups.
To increase of competitiveness of youth at the labour market requires considerable efforts and investments in training. The duration of the employment of young people and quality jobs, remain important challenges in the second decade.
The Chapter 8 reviews the significance of small businesses for creating and preserving jobs, and illustrates the USA where small businesses account for about a half of people employed in the private sector. The role of small businesses in terms of job opportunities by industry and U.S. state is analyzed. Considering economic and social importance of small business, the USA provides comprehensive support to its development. The Chapter 9 examines main trends concerning government policy of U.S. veteran’s social protection; employment and unemployment among veterans in comparison with other population groups; the role the U.S. Department of Veterans Affairs. The employment and labor force participation rates of veterans with disabilities is of special attention.