By Prof Datuk Dr Ahmad Ibrahim

Lately, social media is rife with developments in the United States of America. The disruption brought about by President Donald Trump’s second term has attracted much debate. Some for and some against what he is doing.

The recently set up Department of Government Efficiency (DOGE) is at the centre of much discontent. It is still unclear whether claims of mismanagement and wastage are true.

Many believe the biggest concern driving such divisive views is the economy. The US economy has faced a range of challenges over the years. This was discussed at a recent discourse at a local university, disruptive forces of Trump.

The reality is that some recurring issues and structural problems have contributed to economic difficulties in the U.S. The unfortunate part of it all is that the blame is now put on the rest of the world, especially major economies like the EU and China.

The critical issues

What are the key challenges in the US economy?

Income inequality has been cited as one. The wealth gap between the richest and poorest Americans has widened significantly. This reduces the consumer spending power for the majority, which is critical for economic growth. Stagnant wages for middle- and lower-income workers have exacerbated this issue.

Then there is the decline in manufacturing, a one-time dominance of the U.S. The U.S. has lost millions of manufacturing jobs due to globalisation, automation and outsourcing. This has hurt communities reliant on industrial jobs and reduced economic diversity.

Rising national debt is an acute concern. The US national debt has ballooned due to tax cuts, increased spending and economic crises. High debt levels can limit future fiscal flexibility and increase borrowing costs.

High healthcare costs worry many. The U.S. spends more on healthcare than any other country, yet outcomes are not proportionally better. High healthcare costs burden businesses and individuals, reducing disposable income and competitiveness.

Furthermore, the education system has not kept pace with the demands of a modern, technology-driven economy. Many workers lack the skills needed for high-paying jobs in sectors like tech and advanced manufacturing. One recent cabinet candidate, when asked about ASEAN, was clueless.

Much of the country’s infrastructure is decaying. Aging infrastructure hampers productivity and increases costs for businesses. It also limits the country's ability to compete globally.

Global competition exacerbates matters. The rise of China and other economies has challenged US dominance in trade, technology and manufacturing.

Politics is becoming increasingly polarised. Deep political divisions have made it difficult to implement long-term economic reforms, resulting in policy gridlock and uncertainty.

There is a housing affordability crisis. Rising home prices and rents have made housing unaffordable for many Americans, particularly in urban areas, reducing mobility and increasing financial stress.

The shift to a green economy requires significant investment, and failure to adapt could leave the U.S. behind in emerging industries like renewable energy.

The view of experts

Experts think there are ways to revive the US economy.

Modernising infrastructure can create jobs, boost productivity, and attract private investment.

Educational reform can deliver wonders. Expand access to affordable education and vocational training to prepare workers for high-demand fields like technology, healthcare, and advanced manufacturing.

Income inequality calls for redress. Raise the minimum wage, expand the Earned Income Tax Credit (EITC), and strengthen labour unions to ensure workers benefit from economic growth.

Also increase funding for research and development in emerging technologies to maintain global competitiveness.

Healthcare costs must be reduced. Implement reforms to lower drug prices, streamline administrative costs, and expand access to affordable care.

Manufacturing is in desperate need for revitalisation. Encourage domestic manufacturing through incentives, tariffs, and reshoring initiatives while investing in automation and advanced technologies.

On climate change, which Trump claims is a hoax, there is a need to invest in renewable energy, green infrastructure, and sustainable practices to create jobs and position the U.S. as a leader in the global energy transition.

It is critical to address the national debt by balancing spending cuts with revenue increases, such as closing tax loopholes and raising taxes on high-income earners.

Not to mention housing market reforms. Increase the supply of affordable housing through zoning reforms, incentives for developers, and public housing investments.

The U.S. must not ignore global trade. Rebuild trade relationships and negotiate fair trade agreements to open new markets for US goods and services.

At the same time, encourage small business growth. Provide access to capital, reduce regulatory burdens, and offer tax incentives to small businesses, which are key drivers of job creation.

Political gridlock must be addressed. Foster bipartisan cooperation to pass long-term economic reforms and reduce uncertainty for businesses and investors.

Political will

Reviving the US economy requires a multifaceted approach that addresses both immediate challenges and long-term structural issues.

By investing in people, infrastructure, and innovation, while ensuring equitable growth and fiscal sustainability, the U.S. can regain its economic strength and adapt to a rapidly changing global landscape.

However, achieving this will require political will, collaboration, and a clear vision for the future. The US economic dilemma should be a lesson for us all.

-- BERNAMA

Prof Datuk Dr Ahmad Ibrahim is from the Tan Sri Omar Centre for STI Policy, IISDS, UCSI University, and is also an Associate Fellow at the Ungku Aziz Centre for Development Studies (UAC), Universiti Malaya