An argument against the American Recovery and Reinvestment Act of 2009, President Obama's $787 billion fiscal stimulus package.
# 149925 | 1,462 words | 11 sources | MLA | 2012 |
Published on Jan 12, 2012 in Political Science (U.S.) , Economics (National) , Political Science (Fiscal Policy (economy))
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The paper looks at the actions of the Hoover Administration in response to the Depression in the 1930s to support the contention that the American Recovery and Reinvestment Act of 2009 stimulus package will not alleviate unemployment. The paper addresses the massive budget deficit caused by this package and the resulting risk of inflation and the fall in the value of the dollar. The paper reaches the conclusion that this stimulus plan is too risky because its delivery of extra employment and income are too uncertain for such a large gamble.
From the Paper:"The United States economy is very dependent on consumer spending and revival is essential for economic recovery to occur. For this reason, Obama has significantly targeted tax cuts in the stimulus package as a way to revive spending. But, will consumers spend the money they receive? Economist Bykere (2009) provides a compelling explanation of why this might not happen. He believes that consumers may use two-thirds of the tax cuts for savings or paying off debt. As supporting evidence, consider that only about 15 percent of the previous tax rebates in 2008 actually led to additional spending (Feldstein, 2009). Bykere discusses that consumers will continue to be reluctant to spend because households will face financial pressures due to lay-offs, erosion of financial and housing wealth, slower compensation growth and tighter borrowing conditions. Further, Bykere argues that tax credits to buy homes and vehicles are too small to stimulate demand since factors such as tighter credit conditions and lending standards (higher credit score requirements, larger down payments, lower expectations about future income and employment), job and wealth losses, and rising savings will constrain demand. Even when consumers do spend, Bykere expresses the concern that tax cuts targeting primarily lower and middle income groups would go disproportionately to lower-cost imports rather than consumption of higher-cost domestic goods."
Sample of Sources Used:
- Bykere, Arpitha. "U.S. Fiscal Stimulus Package: Little Bang for Buck?" RGE Analysts' EconoMonitor. 22 Feb 200. http://hr.cch.com/news/employment/022709a.asp
- Feldstein, Martin. "Martin Feldstein: Stimulus Plan an $800 Billion Mistake." The Arizona Republic. 29 Jan. 2009. http://www.azcentral.com/arizonarepublic/opinions/articles/2009/01/29/20090129WP-feldstein0129.html
- Fleckenstein, Bill. "A Pessimist's Prediction: Hyperinflation." MSN Money. 10 Aug. 2009. http://articles.moneycentral.msn.com/Investing/ContrarianChronicles/a-pessimists-prediction-hyperinflation.aspx?ref=patrick.net
- Frankel, Jeffrey. "Twin Deficits and Twin Decades". Federal Reserve Bank of Boston conference. 2004 In The Macroeconomics of Fiscal Policy, edited by Kopcke, R., Tootell, G. and Triest, R. Cambridge, MA: MIT Press, 2006), pp. 321-335.
- Garrison, Roger W. "The Trouble With Deficit Finance." The Free Market Vol 21, No 4. Apr. 2003. http://mises.org/freemarket_detail.aspx?control=435
Cite this Persuasive Essay:
The Risks of Obama's Stimulus Package (2012, January 12) Retrieved April 09, 2020, from https://www.academon.com/persuasive-essay/the-risks-of-obama-stimulus-package-149925/
"The Risks of Obama's Stimulus Package" 12 January 2012. Web. 09 April. 2020. <https://www.academon.com/persuasive-essay/the-risks-of-obama-stimulus-package-149925/>