Eric Fluckiger

POLS-1100-401
Instructor Jamie Nelson
Argument Paper
The Role of the United States Government on the Economy
The United States has the privilege and responsibility of being one of the most influential
countries in the world. Due to this, or perhaps because of this, the government plays a large role
in controlling the economy. There are several ways that Americas laws and policies reach out to
private businesses in order to keep the economy healthy. Not everyone agrees that government
oversight of private business is a good thing, however, it continues to play a large role in most
areas of U.S. business.
The U.S. economy is highly influenced by inflation and the demand for goods and
services. So the government has created monetary policies in order to influence these things. In
order to do this, the Federal Reserve will adjust the federal funds rate, which will raise or lower
the rate that banks use for short-term loans that are given to businesses. This adjustment in shortterm loans will eventually also affect long-term loans, such as mortgages. When the interest rates
in these loans go down, people in the U.S. are more likely to seek and receive business loans,
home loans, and other loans. When people borrow this money, they will then spend it on goods
and services. People will build and buy new houses, cars, equipment for their business,
expansions for their business, etc. This will allow for an increase in jobs, because you will need
workers to build the houses, sell the cars and equipment, and businesses will hire new people as
they expand (The Board of Governors of the Federal Reserve System). This is how adjusting the

federal funds rate will also influence the employment rate. It leads to more money being spent
around the entire country, which is good for everyone.
I believe that the government being allowed to adjust inflation is a positive thing,
although not completely foolproof. It is a way to manage Americas financial crises that occur
from time to time. Since the most recent economic crash and extremely high unemployment
rates, the government has kept the federal funds rate very low. The Board of Governors of the
Federal Reserve System explains on their website, FederalReserve.gov, that their long term goal
is to maximize employment and keep inflation at 2 percent. The experts on the Federal Open
Market Committee constantly measure a number of things to try and anticipate whether or not
the federal funds rate is taking them in the direction of their goals. Although this process has
proved to be in no way perfect, it is my personal belief that doing nothing and allowing interest
rates to go completely uncontrolled would result in disaster for the entire country.
A second way that the United States government intervenes in the economy is by
encouraging business. Both the state and federal governments want to encourage all types of
businesses, and have allowed the creation of the Small Business Association (SBA). The SBA
can help issue small business loans, provide counseling for new businesses, and even facilitate
government contracts with private businesses (U.S. Small Business Association). The
government also encourages certain types of business by creating subsidies. In his article
Government Subsidies for Business journalist Marc Davis states that the government has
identified certain sectors of business that are vital to the health of the economy. These include the
energy sector, the agriculture sector, and the transportation sector. The U.S. government gives
grants and low-interest loans for research and development of different types of energy, and they
own dams and other energy resources in order to ensure it is available to everyone. Government

land is also leased or sold very cheaply for oil and coal uses. In regards to agriculture, some
farms are given cash payments when they are experiencing financial hardships. The government
will also give gift loans to farms, which have no consequences for nonpayment, and sell cheap
insurance to help farmers in the event of a natural disaster. With transportation, the U.S.
government will help provide funding for airports and railroads, and will give major tax
subsidies to private transportation businesses.
I think subsidies can be good in times of need, and the idea that not allowing certain areas
of the economy to fail in order to maintain the health of the economy is a valid one. However, I
think some subsidies can be overused and are unnecessary. I think more research needs to go into
seeing whether or not the amount of money the government spends is worth it in the long run.
Particularly in regards to transportation, because in Utah we have seen many issues with the Utah
Transit Authority providing very high wages to their upper management, yet still seeking tax
subsidies to facilitate projects.
The third way the U.S. government seeks to control the economy is through regulation.
Policies that place rules and restrictions on private businesses are regularly at the forefront of
American politics. These policies are supposed to prevent businesses from having too much
power over society and not allow them to control the economy. There are laws that mandate a
minimum wage, so as to prevent companies from paying their employees wages that are
abusively low. There are also policies that require certain businesses to provide health insurance
and paid time off. In addition, there is an entire agency devoted to placing regulations on the
environmental impacts of companies. There are a number of laws in place to prevent
monopolization of certain areas of business (Holt, Michell). The U.S. government spends a large

portion of its time and money to regulate business practices, and it is a very complex issue that
many believe have a profound effect on the economy.
Of all the areas of government interference in the economy, regulation might be the most
contested. Many politicians believe that government should have no regulations on businesses,
and that doing so is a violation of the rights of the American people. They think regulations hold
corporations back from success. I would be very interested to see the financial backers of those
politicians who support these ideas, as it is likely they are funded by big business. It is my belief
that large corporations do not like government regulations because it costs them money. They
seek a lowest possible minimum wage because they want to pay their employees as little as
possible, so as to increase their bottom line. Many large corporations do not want to provide
health care and time off for their employees, again, because it costs them money. I think it is
essential to have these regulations on businesses not only to support the economy, but the overall
well-being of the American people. If anything, regulations like these should be increased.
Companies should provide more paid leave and health services, and the minimum wage should
be much higher than the current rate.
The U.S. economy is, in some ways, unlike any other economy in the world. This is, in
part, due to the specific oversight of the government on various parts of economy. Interest rates
and inflation are carefully controlled in order to keep employment rates positive and money in
the hands of the American people. Government subsidies are used to encourage business growth
and make sure essential businesses areas are thriving. Corporations are regulated in ways large
and small. While many of these policies are not perfect and some very flawed, they are necessary
for the success of not only the U.S. economy, but the success of the American people as a whole.

Works Cited
Holt, Mitchell. Five Areas of Government Regulation of Business. Chron. Demand Media, n.d.
Web. 4 Dec 2015.
Davis, Marc. Government Subsidies for Business. Investopedia. Investopedia, 9 Mar 2011.
Web. 4 Dec 2015.
Board of Governors of the Federal Reserve System. Why are interest rates being kept at a low
level? Federal Reserve. n.p. 8 Apr 2015. Web. 4 Dec 2015.
Board of Governors of the Federal Reserve System. How does monetary policy influence
inflation and employment? Federal Reserve. n.p. 16 Jan 2015. Web. 4 Dec 2015.
U.S. Small Business Association. Resource Guide for Small Businesses. U.S. Small Business
Association-Utah Edition. 2015-2016. Web. 4 Dec 2015.