Free «The Minimal Impact of the Stimulus» Essay Sample

According to the American Recovery and Reinvestment Act of 2009, the American government promised to increase government spending on the weak economy until it recovered. Two years later, Assessment of the trend shows that the impact of government spending was minimal according to Casey Mulligan. Obama administration had assured Americans that the stimulus package would have created or saved over three million jobs by 2011 but according to data and economic reasoning, the outcome of government spending on American Gross Domestic Product (GDP) was negligible.

Mulligan points that, instead of stimulus package adding more jobs, the number of unemployed people is below by an approximately two million from the time the American Recovery and Reinvestment Act of 2009 was passed. On their part, the Obama administration have rose to defend the law arguing that, although the stimulus package did not accomplish its purpose as projected, it has played a great part in making sure the drop of employment only dropped to two million rather than over five million if it had not been passed. The truth behind the stimulus package shows that the stimulus increase coincided with economic weakness but its decline did not coincide with economic strength. Federal funds, employment and home prices were low as stimulus spending was ending while unemployment rates remained on top.

According to economic analysis, in particular the Keynesian analysis, the economic growth should have reduced at the point when stimulus spending went down. The multiplier connotes that each dollar added in the economy through government spending will result to 1.5 dollar additional to the GDP. To make sure the impact is well measured, Mulligan measured at the end of fourth quarter when stimulus law was recovering. If Obama administrators were right, then the economy growth would have increased more during government spending time and slow when spending decreased.  This did not happen, as GDP growth was lower when government was spending more. Despite the shortcomings of the stimulus package spending on the GDP, it had some minimal benefits including the extension of the unemployment insurance that was set aside to help businesses and people with low incomes.

Fed survey: Economy expands throughout US by CHRISTOPHER S. RUGABER

The article looks in to the growth of United States of America economy for the first two months of 2011. According to the Christopher Rugaber, the economy reported growth with pressure on many businesses across US to increase their prices. A survey taken by the Federal Reserve showed that, all of its twelve regions reported modest to moderate pace growth that showed an increase in job creation. The survey results showed that retail sales were on increase in 10 out of the twelve regions while factory activity increased in eleven districts expect in St Louis. Despite the increase, the report showed an increase in costs for both manufacturers and retailers. Manufacturers were able to pass their increased costs to retailers while retailers had passed or were on verge of doing so to their customers in most districts. This trend according to Steven Wood, an economist at Insight Economics, was trouble marks of inflation. On the other hand, other economists argued that the survey showed no signs of increased wages that would have made the inflation troubling.

Although the chairperson of Federal Reserve, Ben Bernanke dismissed the threat of inflation, legislators have blamed the Fed's six hundred billion-bond purchase program as the cause for the higher prices. The increased prices are heightened further by the recent increase in oil prices, wheat, and other commodities in the globe. Bernanke accepted the hike in price but argued that it was temporary and was because of political turmoil in the Middle East. The growth in the economy has been minimal and has not been enough to decrease the US unemployment rates that had risen to 9 percent in the month of January. The survey was optimistic, that the jobs opportunities would increase in many districts as the businesses increased its functions. Wages were steady in five districts, increased steadily in seven, thereby acting as restrain to future prices. The sector that showed weak point was housing which reported low levels in all districts.


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