2009 Stimulus Package
of President Obama

 

  1. What is the basis of the stimulus in economic theory? Explain the notion of multipliers and how they apply here. What factors might reduce the effective multipliers?
     
  2. Since the origins of stimulus policies with the Keynesian economics of the 1930s, a number of more recent economic theories have argued that fiscal stimulus through aggregate demand policy has limited effectiveness at best. These theories include the Ricardian equivalence theory, the policy ineffectiveness theory, and issues related to international trade multipliers. Explain these theories briefly and explain their implications.
     
  3. Some are critical of the stimulus bill. By name and design, is it really all stimulus spending or intended to be stimulus spending? Specifically, what kinds of things are being financed by the bill, and are they stimulative? Are they even intended to be "stimulus"?
     
  4. Following the article by Riedl, outline the history of stimulus packages and their effectiveness. According to Riedly, why do stimulus packages not work?
     
  5. Professor Taylor argues that the crisis began as a financial crisis, not an economic one. What or who does he argue was the cause of the crisis? Explain.
     
  6. Separate from the nature of the expenditures or programs are the financing and bail-out efforts. The stimulus bill amounts to $787B which will rise to over $1 trillion after financing costs. The Fed has increased bank reserves by 10 fold and spent over $1 trillion in bail-outs. President Obama is now talking about a universal health care program as a necessity, with minimum costs in the trillions of dollars. How might all this debt, spending, and money creation hurt the U.S. now and in the future? How might the negative impacts of these be avoided?
     
  7. Some policymakers have argued that the so-called stimulus bill has not been enough. They are promoting the idea of a second stimulus bill which they are calling a "job creation bill". Has the (first) stimulus bill actually failed? How much of the spending of the first bill has been achieved and what is the nature of the spending?
     
  8. Mr. Obama has argued that a second stimulus bill should focus on "shovel-ready" road and bridge building projects which he says will create jobs quickly. What is the evidence on this kind of spending and job creation? Does a second bill make sense?
     
  9.  What are the implications of the bailouts and stimulus bill(s) on foreign exchange (the dollar) and America's ability to finance its deficits? What are the implications of the deficits and money creation used to finance the spending bills?