Stampede to Stimulus

In response to the recession happening in the United States, the government wants to present a stimulus to the economy. This means higher government spending and tax cuts. The stimuli can jumpstart the economy so that it will make its way up again. The criteria of the stimulus will be based on three “T”s: timely, well-targeted, temporary. The stimulus must be presented to the American economy before the recession is over. It also has to target the people who will give the best results. Finally, the situation after the stimulus is presented must not permanently cause the government’s budget position to be worsened. Many ideas which may fit the criteria have been presented. However, none has been confirmed on. The final decision will be announced on January 28th 2008.

The situation presented within the article is a very good real-life example of fiscal policy. Fiscal policy is the adjustment of government spending and tax policy to economic conditions and is used to correct periods of slow economic growth and high unemployment. Within the article, they mention higher spending and tax cuts to jumpstart the economy during the United State’s recession in housing. As you already know, homes have become expense to own and mortgages are expensive to pay off. Construction activities have slowed down and many mortgages foreclosures have been made. Many ideas have been presented. Some of these include a temporary tax-rebate, help for the jobless, payroll tax holiday, a $250 tax cut, housing assistance, home-energy subsidies, expanding payments to the unemployed, and building of infrastructure to provide jobs. Many of these ideas also fall under the economic rationale of income distribution as well as being an example of the fiscal policy.

I personally believe that in order to help improve the economy of the United States, not only does the spending of the government need to be increased, perhaps setting a price ceiling for housing needs to happen. Since the recessions seems to be rooted from housing problems, perhaps the lowering of the pricing of houses will cause houses to be more affordable so that more people will be able to buy one. This may decrease interest for banks and may help prevent losses. This may free up some money for consumers to spend to get the economy to move again. I believe that many of the ideas presented by the authority will help, but only temporarily. What happens after the stimulus is taken away? The United States does need a stimulus, but a permanent one and they need something else to become the pillar of the economy instead of housing.

http://www.economist.com/world/na/displaystory.cfm?story_id=10534098