Presidential Speech - Solving the Economic Crisis

     Over the past few months, oil prices have gone through the roof, due to the worldwide shortage of oil. This shortage is forcing all sectors in our economy to pay higher fixed costs and raise their prices. This has caused a severe case of cost-push inflation, due to the rising prices of all companies’ goods. Our economy’s prices have risen 9% annually. This high rate of inflation has caused many of our vital sectors to lose large amounts of money. Our major sectors have all had to layoff many of their workers to compensate for their higher fixed costs they’re incurring to increase company profits. Thus, unemployment has risen to 12.5%. The high unemployment has caused the Gross Domestic Product (GDP) to drop to 13% because no one has any money to spend.

     I am extremely concerned with what I see around me. Our nation is filled with people starving in the streets, families sitting at home worrying if they will be able to afford basic necessities, employers seeing their stores empty of customers, and the streets of cities devoid of urban life. Everyone is reflecting on how great the economy was before we inevitably became aware of the fact that the oil, which our country depends upon, is a limited resource. I will bring about change! My administration has been discussing the government’s options to help resolve our high inflation and unemployment problems. I have asked my team of Economic Advisors to decide upon government policies, which will bring our economy out of this contraction and they have just recently brought their decision to me. Having reviewed their suggestions, I agree that the best course of action to return the economy to a healthy state is to implement a supply-side fiscal policies as well as monetary policies that my team of Economic Advisors has decided upon. I plan to act and act now. Only through government intervention can we motivate you, the people, to act in a way that will be able to improve the crisis slowly and steadily.

     Allow me to briefly explain fiscal and monetary policies. Fiscal policies work to stabilize the economy through taxation and spending. An expansionary policy is a plan to stabilize the economy through an increase in product output, whereas a contractionary policy is a plan to decrease the growth of the economy.

     Monetary policies (bank reserve requirement ratios, Federal Reserve discount rate, and open market operations) effect banks’ money supplies and the amount of money that is borrowed to citizens. Such policies can increase economic activity and fight inflation.
I am proposing supply side fiscal policies, which involves giving subsidies to companies as well as cutting taxes on high-income people, helping aggregate supply. The government subsidies will be given to companies that plan to research alternative energy sources. Obtaining company research on alternative energy sources is necessary for their survival and for the well being of our nation. A nation that will no longer be dependant on our low oil supply with prices of goods and services lowered and a large number of Americans employed. The research is vital for our nation. We must free ourselves of our “dark” world!

     The subsidies will also serve as a stimulus for our economy. As we increase spending, we increase the number of people receiving money who in turn will be willing and able to spend their money. That process, the multiplier effect, will help increase aggregate demand and create job opportunities in businesses that wish to expand.

     I have also decided to cut taxes on high-income people to encourage money saving and investing. When the rich receive extra amounts of money, they will be more willing to put some of their money into banks. With a surplus of money, banks can offer loans to people at low interest rates. In turn, low interest rates encourage people to borrow and spend money, stimulating the economy and creating jobs with the increased demand for goods.
My monetary policy will lower the discount rate, the price that banks must pay to borrow money from the Federal Reserve. If interest rates are low, banks will take advantage of the situation and obtain a surplus of money. With increased supply, banks will lower their own interest rates and be more able to supply an increased demand for borrowing money. Every dollar that is borrowed will circulate more money throughout the economy, increasing jobs.

     I am also suggesting that the Feds implement an Open Market Operation of buying bonds from banks with created money, which will increases banks’ money supply and lowers interest rates. People will then take out loans and proceed to invest and spend that money. My only concern for increasing the money supply with monetary policies is the fact that people on fixed incomes will lose their buying power with the inflation that could result.

     Although I wish to solve this crisis as soon as possible and with the least suffering for the citizens, the policies have a few negative side effects. There is no perfect plan to recover the economy’s inflation and high unemployment without taking risks on behalf of the people of our country. Yet, the country must risk lag, decreasing the buying power of fixed incomes, and increasing the national debt.

     It will take many months to approve and implement these policies including the reactionary time for citizens. Our economy could very well be on its way to recovery or entering a recession. Should our economy be recovered and everyone is employed, our policies could bring about inflation once again.

     Our policies will also be increasing the money supply as well as the amount of money that people spend which could increase the inflation rate of 9% annually. Should inflation raise any more, people with fixed incomes and people without incomes will not be able to buy even basic necessities. I can only suggest that those on fixed incomes begin preparing to face high inflation by investing in items that will retain their value despite inflation.
Another concern for our policies is the fact that the national debt will increase from its already high level. The policies that I am suggesting require the government to spend money and decrease taxes, which hinders our ability to pay back the money that is spent.

     In conclusion, my administration and myself would like to stress the fact that this crisis will not be solved in a week. Nor will it be solved without harming people. I do not believe the problems we are facing will go away until we find a cheaper source of power and I refuse to consider taking a laissez-faire approach to this situation because it would only prolong the country’s suffering. It is important when considering the troubles of lag, inflation, and debt, to remember the end result that I am aiming for: low unemployment, low inflation, and economic expansion fueled by an alternate energy source. In the words of Euripides, “A coward turns away, but a brave man’s choice is danger.” All of the troubles that we will be forced to overcome are worth an improved condition of our economy. Soon our country will be a formidable Utopia with happy citizens. My dream is that a job will be given to every person in want of it and that we, as a country, will no longer use and abuse what resources we have left. The lack of oil is not a curse; it is a blessing. A Blessing that reminds us not to waste what little resources we have.