The economy of the United States of America has been struggling since the onset of the recent economic recession that devastated this economic and brought a lot of economic activities to a near standstill. However, there are different actions plans that have been taken by the US policymakers and the Obama administration as a whole in response to these economic challenges that are meant to oversee an economic recovery process of the United States. Among these actions plans are tax cuts and increased government spending as a stimulus package. There are pros and cons that are associated to tax cuts or increased government spending as stimulus economic package.
First, tax cuts have been found to increase the overall income of consumers, a factor that increases their spending in the economy. As a result of this, the overall economy is boosted by the fact that there is an increase in the economic activities which results in an enhanced economic recovery process (Taylor, 2008). Similarly, increased government spending acts as a stimulus packages works on creating of jobs that raises the number of people who are able to earn a substantial income, which in the end result in an increased spending by the consumers in the economy.
On the other hand, tax cuts have been found to hamper the overall income of the government and this puts the government at a risk of experiencing budget deficits as it is unable to collect enough revenues to foot for its budget. This may negatively affect the economic activities of the government. In that line of thought, an increased government spending too increases the chances of the government experiencing a budget deficit that has the potential of either affecting government activities negatively due to lack of funds, or to cause an induced borrowing that increases national debt (Solomon, 2009).
Therefore, whereas there are various methods that can be employed by the United States of America as it works on getting itself back on track economically, there are merits and demerits of different channels of economic recovery that can be pursued that need to be examined in details to allow for a speedy and effective economic recovery.