Free «Analysis of the article, Obama’s stimulus plan: microeconomics analysis» Essay Sample

In the article, Obama's stimulus plan: microeconomics analysis, it is very clear to point out some strengths and weakness. The package shows a trickle into the income of small earners. It is a perceptible amount: perhaps a $12 or $13 a week for many American workers, in the form of lower tax withholding.

CBO estimates that by 2019 the Senate legislation would reduce GDP by 0.1 percent to 0.3 percent on net. Stimulus plan would have similar long-run effects.

The stimulus package totaling to about $820 billion while the Senate is working on a proposal reaching about $900 billion in spending increases and tax cuts.

CBOs basic assumption is that, in the long run, each dollar of additional debt crowds out about a third of a dollars worth of private domestic capital. There is no crowding out in the short term, so the plan would succeed in boosting growth in 2009 and 2010.

The agency projected the stimulus plan would produce between 1.4 percent and 4.1 percent higher growth in 2009 than if there was no action. For 2010, the plan would boost growth by 1.2 percent to 3.6 percent.

For the growing ranks of the unemployed, it will be more noticeable: benefit checks due to stop will keep coming, along with an extra $25 a week.

At the grocery store, a family of four on food stamps could find up to $79 more a month on their government-issued debit card.

And far bigger sums will appear, courtesy of Washington, on budget ledgers in state capitals nationwide: billions of dollars for health care, schools and public works.

There is no doubt that the impact of the $819 billion economic stimulus package advanced by President Obama and approved by the House on Wednesday will start to be felt within weeks once the final version becomes law.

But estimating the effectiveness of the huge program of tax cuts and spending will be in getting America's economic engines moving up again is a far more complex calculation requiring almost line-by-line scrutiny of the 647-page bill, lawmakers, economists and policy analysts say(Miranda Shaw,P9).

Even though it may be hard to guess how well the overall plan will work, it is easier to draw conclusions about its individual components, gauging them against the basic goal of any stimulus: to promote economic activity and create jobs as quickly and efficiently as possible.

Devising any economic stimulus plan is tricky: initiatives that can be carried out relatively fast, like tax cuts, tend to provide fewer bangs for the buck in terms of generating jobs and economic growth, while initiatives likely to spur more robust activity, like public works projects, can take so long to get under way that they arrive too late.

The provisions intended to have the swiftest impact are the tax cuts, totaling $275 billion, roughly a third of the package.

Republicans say the cuts are too small, some Democrats say they were ill designed in a vain effort to appease House Republicans, and some economists say both sides are right: that the plan should include more effective tax cuts and more of them, and also address specific problems like the weak housing market.

Get 24/7 Free consulting
Toll free


    Preparing Orders



    Active Writers



    Positive Feedback



    Support Agents


Type of service ?
Type of assignment ?
Number of pages ?
Academic level ?
Timeframes ?
Spacing ?
Currency ?
  • Total price
Continue to order

Mr. Obama's approval of tax cut would provide a credit of up to $500 for individuals and $1,000 for couples. These has definitely won praise in an analysis by the Tax Analysts, a nonpartisan research group and regained the Americans confidence because it can be carried out quickly by reducing the amount of money withheld in the paybacks.

On the other hand, the same groups have criticized it because it would help families earn as much as $150,000 a year, who are more likely to save than spend (Kale, James. P23)

Experts feel that adjusting and withholding rates could cause complication and delaying the income. But some economists generally support the stimulus think that the main tax proposal would provide limited economic lift.

Concerning the production possibilities the stimulus plan would be relatively be effective in the provision of assistance to foreign states, although some comply with balanced-budget requirements but are facing the prospect of steep cuts in jobs and services. It is however important to know that Aid to states does not expand economic activity, but it helps prevent cuts that would make the downturn even worse. .

The stimulus plan would also create a $79 billion state fiscal stabilization fund, disbursing the last half of the money in the late 2010. The Congressional Budget Office has also estimated that a portion of that money would be spent this year (Kale, James. P23)

The greatest prospect of delay in spending is on infrastructure. The bill provides $30 billion for highway construction and tens of billions more for other transportation projects, water projects, park renovation, military construction; local housing projects and more.

A Congressional Budget Office analysis found that only 64 percent of the bill's spending would be completed within 19 months, and spending on construction projects was among the slowest.

If the economic recovery is slow, that timing could work out perfectly, giving the economy a jolt just when faster-acting components are wearing off. But if there is a quicker-than-expected rebound, many of those projects could start just in time to compete with renewed private spending.

Then there is the risk that the projects themselves have little or no long-term economic value and simply drive up the budget deficit. Democrats bowed to Republican pressure on Tuesday and stripped from the bill a $200 million provision for National Mall restorations (Miranda, Shaw. P9).

A look at more than $140 billion in the stimulus plan spending on education finds some that can move quickly - for instance, $13 billion each over two years. This serve as an impoverishment to students, and for special education under the Individuals with Disabilities Education Act.

But also included are programs that even under the most optimistic timetable will take longer to complete, like $20 billion for school renovations. These would provide little near-term help for the economy.

Similar scrutiny could be trained on health care and especially on alternative energy programs. Like some of the education spending, a large chunk of health care spending would not start until 2012 or later, when, most experts think, the recession will be over.

Unemployment benefits and food stamps are such useful stimulus tools that budget analysts refer to them as "automatic stabilizers."

They are built into the system, allowing money to flow quickly to people who need it and likely to spend it.

The House bill would spend $20 billion over five years on added food stamps. If the recovery legislation is adopted by mid-next year the first added food stamps will be delivered in April and nearly all of that aid used that month (Miranda,Shaw.P9).

The legislation would also devote roughly $43 billion over two years to extend and increase unemployment benefits. The provision would add as much as 33 weeks of benefits, for states with the highest unemployment rates.


What Our Customers Say

Now Accepting Apple Pay!
Click here to chat with us