In discussing the structure of the American economy I find myself reflecting on the American economic system as a whole. To simplify things a bit, it is easy to see that the main body of the US economy consists of the main urban areas along the two coasts and New England. The East Coast is comprised of mostly small and medium-sized cities, including Boston, New York and San Francisco, California. The West Coast consists of mainly the large and mid-sized cities of Seattle, Portland, San Diego, Salt Lake City, Denver and Phoenix.
The system of the American economy is built around the principle of providing access to the American consumer market by having a central government control the distribution of money. In other words, the principle is to have low barriers to entry and allow for economic growth by having the least amount of over-regulation. This has created a very favorable situation for high rates of productivity and innovative activity by entrepreneurs. However, the high levels of over-regulation and the associated artificiality of the economic system have resulted in the unnatural lowering of the rate of economic growth. The result is an economy that is neither too efficient nor too inefficient.
The overall economic structure of the United States now faces many challenges. It appears to be facing two major problems. The first is the increasing complexity of the American political system. The growing polarization between the parties in Congress means that members of both parties are more determined to maintain their narrow interests. The resulting problem is that compromise between the parties is becoming more difficult as the governing coalitions put forth a series of agenda items to the voters. These are often not fully supported by either party's representatives in Congress and the result is that the policy proposals do not get passed.
The other problem facing the American economy is the excessive concentration of wealth at the top of the scale. The top one percent of income earners own almost all of the wealth in the economy. As a result, the economic system becomes highly inefficient as a result of the concentration of wealth at the top of the scale. One result of this process is the excessive concentration of debt at the bottom end of the economic scale. Again, this causes inefficient resource allocation and the economy as a whole does not function efficiently.
To correct these problems, the economic system requires that the government address both issues at once. The current attempts at creating a mixed economy are not working. They are basically attempting to fix one problem while creating another. For instance, the attempt to increase spending by state governments on infrastructure is met with resistance from state governments that want their natural resources retained. Increasing the amount of taxation on the wealthy is another attempt at increasing efficiency, but is again met with opposition from state governments.
By creating a hybrid or mixed economy, the current inefficiency can be solved while avoiding another huge inefficiency created by a system of rigid public services and taxation. The first step in creating such an efficient economy is to remove the excessive concentration of wealth in the hands of the top one percent of earners. A solution is to reduce the size of the top tax brackets. This will make everyone else's income more equal so that each income bracket will have more money than it does now. Removing excessive governmental spending will allow for efficient allocation of natural resources. Finally, increasing freedom and decreasing the size of the government will decrease the need for large corporations, unnecessary government regulations, and other barriers to entry that limit the free market.
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