Introduction Economy is defined as the activities surrounding the production and distribution of goods and services in a given geographical area. The Gross Domestic Product (GDP) is the measuring index for economies. Under this measure, the United States of America is the single largest country economy and is about a quarter of the world’s economy according to the CIA World Fact book. Although the democrats and the republican are differently opinionated over decisions on the economy, they both ultimately aim to improve it and the differences are just politics. History Right from the formation the first federal government of the George Washington in the late 1700s, divisions on how to best run the economy emerged. Prominent differences were between the then Secretary of treasury Alexander Hamilton, a republican federalist, and Secretary of state Thomas Jefferson a democratic federalist. Hamilton made several proposals to Congress to curtail the financial strain and to boost the struggling economy. Although these were passed, they were opposed by the Jefferson’s group. To begin with, all debts from issuing of bonds to both foreign and domestic holders were paid off. The federal government then assumed individual state debts. In so doing, creditors were now required to deal with the national government. This move was intended to increase the individual state’s obligations to the federal government. Hamilton further proposed to Congress that the Bank of the United States be created. This is what is today referred to as the Federal Reserve (Oates et al. 109). During that period, Congress had no constitutional authority to ratify a charter for the establishment of a bank. It however had authority to do anything “necessary and proper” to carry out its delegated duties (Berkin et al. 218). The constitution therefore implied Congress could establish a bank (Billington, 94). Jefferson opposed this on the grounds that it was unconstitutional and therefore illegal with support from James Madison, a prominent democrat. The banks’ purpose was to handle repository of national assets, issue paper money based on assets and source investment capital (Hofstadter 56). Current economic situation The current controversy over the U.S economy within the political cycles is the U.S budget. Issues around it include the bail out packages that were handed out in the midst of the financial meltdown, and the proposed taxation methods. Differences also emerge in the priority of expenditure. The democrats and the republicans, like on many other issues such as health and foreign policies, have taken different stands on the economy. It all started with the crash of the housing markets. Like the great depression, over speculation by financial institutions on high risk loans after decades of relative stability finally collapsed. These loans were invested mainly in real estate and in the stock market due to the high returns. When no one bought stocks and the houses anymore, the banks simply had no money to lend out or give the customers who had deposited it. The customers lost, businesses were affected and the entire economy went down. Several measures to improve the situation have been differed on by the democrats and republicans, but either wa