Rising Gas Prices and the Cycle of Economic Growth

With gas prices set to rise beyond the $4 mark across the US, citizens are finding themselves trapped within a vicious cycle of economic hardship. The current price, which is based on the inflated cost of oil, has already risen to its highest point since July 2008, and economists are predicting that that $4 price for gas may take hold nationwide throughout July and August. This, in line with high unemployment and increased cuts in public expenditure, is creating the likely prospect of the nations economy grinding to a shuddering halt.

The Factors in Economic Growth

There are two significant factors which drive capitalist economic growth. The first of these is enterprise, and the investment in businesses that to allows them to expand their operations and hire new staff. This then follows in to the second factor, which is consumer activity and the revenue that citizens reinvest into the economy. By itself, this is the single most important influence on the financial growth of the US, but it is in part reliant on an environment where people are able to work and earn a regular salary.

In an environment where both independent enterprise and consumer spending is hindered, it creates a distinct cycle of economic hardship. This is debilitating for both the federal government and private sector growth, but also has a deep and perpetual impact on the day to day existence of citizens. As is typical with these types of circumstance, one factor often influences the other, so as long as citizens are unable to find employment and earn any semblence of disposable income, so too they are forced to reduce their levels of expenditure and tighten their financial belts.

Conversely, while consumer spending is minimal, companies in the private sector are likely to receive less revenue and find themselves reducing their numbers of staff rather than hiring. In essence, neither factor is able to prosper or assist in boosting the other, so the nations economy is left within a constant state of limbo. The challenge that faces the US government is how to resolve this, and in particular which aspect of the economy to address and revive to create the more beneficial cycle of prosperity.

The Budget Deficit and Cost of Fuel

This search for balance and economic growth is difficult enough at the best of times, but it is even more challenging where other complicating factors exist. In the contemporary US, the budget deficit and rising cost of fuel are elements of heavy financial import, and put an even greater strain on both federal reserves and those of the individual citizen. Where as both government spending and the manipulation of fuel costs may usually offer an opportunity for financial respite or resolution, the current circumstances render these items as obstacles rather than potential tools for growth.

For example, government spending could be used to invest millions into the ailing private and public sectors, but the estimated $1.5 budget deficit means that such a significant action is beyond the realms of the senate. For example, the UK has recently revealed proposals to invest £450 million into businesses, and this is part of a considered and driven plan to inspire an enterprise led economic recovery. Without this course of action, or something remarkably similar, the US is hindered in terms of its attempts to fuel a recovery through investment.

Rising fuel prices are also debilitating, and force already struggling citizens to reduce their levels of disposable income still further in order to fund a necessary cost. With fuel considered as a practical rather than a luxury purchase, and required to courier children to school or those in work to their places of employment, it is therefore purchased at the expense of more expensive but non essential items. Subsequently, industry and trade suffers through a reduced income and becomes ill equipped to lead a nation and its people out of economic hardship.

Patience Key to Recovery

Given this rare and difficult set of fiscal circumstances, it is difficult to see how the US can plot its path towards economic recovery and stability. What is clear however is that the process will take a significant amount of time, and has already begun tentatively with the recent budgetary agreement that avoided a partial government shutdown. From this humble beginning, it must be hoped that the large national deficit can be reduced and release an increasing amount of capital for public expenditure.

It is only then that the US can begin to regenerate its public sector activities and boost private enterprise, while creating jobs and increased consumer spending in the process. This then forms the prosperous economic cycle required for growth, and in theory lays the foundation for a continued spell of stability and fiscal responsibility. While it may appear a world away at the present time, the citizens of the US have a duty to understand the position of the federal government and the challenges that face the nation as a whole.

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