How can the government address the problem of unemployment?

Answer 1

There are two primary categories of tools that may be used by a government to reduce unemployment. Monetary tools involve the availability and cost of money in the economy. At the simplest level, it means printing more money. But in fact, the way a government increases or decreased the money supply is by lending and borrowing money on the open market in the way of bonds. The government can lend the economy money at a very low interest rate. This makes money cheap to borrow, money flows into the economy and creates growth. If there is inflation, the government lends at a higher rate, making borrowing more expensive, and decreasing the money supply, contracting growth, and slowing inflation.

Fiscal policy is the other category. Government taxing and spending is fiscal policy. A government can slow an economy by increasing taxes, thus reducing the amount of disposable income of consumers, and redirect that money to specific projects. Roosevelt's new deal changed the tax structure, and borrowed money, spending that money specifically on jobs projects to employ the maximum number of workers. Great infrastructure projects like the Hoover dam, and the Tennessee Valley Authority, were built in this way.

In United States politics, one of the great debates continues to be over fiscal policy, with Republicans arguing that lower taxes, and lower government spending, creates economic and job growth in the private sector. They also argue that the growth created by lower taxes creates more tax revenue in the long run due to the greater total spending.

Democrats agree that lower taxes lead to growth, but only to a point, and then there are diminishing returns. When taxes become too low, necessary government functions are impaired, as tax revenues decrease at a greater rate than increases in revenues created by growth. The resulting decrease in government revenue creates a need for the government to borrow on the open market due to deficit spending, thus decreasing the money supply in the economy, and leading to slower growth.

My editorial comment is that both parties are right to a point. Taxes must be adjusted to meet the needs of the nation for revenue, and balanced against economic forces described above that may be in play at any given time. One cannot have a cookie cutter approach to all economic situations, such as always having extremely low, or very high taxes, or very limited, or more expansive government involvement in creating GNP.

Some other specific steps involve trade policy. Import and export taxes, as well as subsidies, can retain or increase jobs in certain industries. These strategies, however, lead to inefficiency and economic distortion which, in turn, can lead to lower GNP, and, arguably, fewer total jobs. There are arguments for such protectionism. These arguments include the creation of a greater variety of jobs to suit a variety of talents, and create a more diversified labor pool. For example, not everyone in the U.S. is well suited to be a banker, lawyer, or doctor. There must be a variety of jobs available to suit the variety of talents in the labor market. Similarly, having a reliable domestic supply of food is generally considered a matter of national security. Therefore, Great Britain, as well as most other nations, use fiscal policy to encourage domestic agriculture at the expense of imported food.

Answer 2

The answer to this question applies to the United States as well to other countries with a free market economy or a mixed economy. On a short term basis unemployment can be decreased by printing more money. Sometimes this short term basis can be as much as two years in length.

Answer 3

The government HAS to exercise political will and everything will follow.

Answer 4

Cut taxes and promote small business growth.