The Overall Economic Challenge the US Is Facing Today Focusing on Both Research Paper

The Overall Economic Challenge the US Is Facing Today Focusing on Both Domestic and International Issues - Research Paper Example The US market played a key role in the economic recovery promotion thanks to its openness. However, the situation radically changed in 2001. With the sudden failure of the capital spending boom, the U.S. economy found itself in hard times. Fuelled by a number of serious economic challenges, the present recession seems to be long and quite drawn out. This paper examines some economic challenges faced by the U.S. today, both domestically and internationally. It is based on the review of a range of peer-reviewed articles in the field that focus on various aspects of the U.S. economic challenge. The paper identifies some common themes in the sources explored, as well as attempts to provide solutions to the questions raised. Inflation and Budget Deficit as Major Economic Challenges A well-known American economist Shapiro says that inflation is one of the signs of the economic system’s lack of capacity to handle its copious responsibilities. He defines inflation not as a purely econ omic problem, but above all the problem of social and political origin. Shapiro writes, â€Å"To understand the basic underlying causes of inflation, we must ask ourselves why our government has persisted, through Democratic and Republican administrations alike, in making the political choice of running large budgetary deficits and financing these, in part, by increasing the supply of money.† (Shapiro, 1981, p. 145). Therefore, combating inflation is inseparably linked to overcoming the budget deficit, which has grown enormous in the last decades. Shapiro explains that the current inflationary policies are not the result of incompetent governmental acts. They rather illustrate the response of the government to the pressure on the part of those constituents that demand increasing and additional benefits from the government, yet do not want to accept tax increases.