UnThreaded | Threaded | Whole Thread (3) | Ignore Thread Prev | Next
Author: boad Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 35377  
Subject: Fixing the Economy? Date: 12/3/2002 5:52 PM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 1
What can the Federal government do to improve the economy?

Most economists believe that "discretionary fiscal stimulus" (e.g., tax cuts or spending increases by Congress) doesn't do much to stimulate economic growth and shorten the typical garden variety, post-WWII recession (and may be counterproductive).

Monetary policy works better for recessions -- monetary policy is controlled by the Federal Reserve. In fact, the Federal Reserve has pursued a policy over the past year of aggressively driving down long-term interest rates. This action in turn has encouraged Americans to refinance their homes at lower rates, resulting in a lower monthly payment and even substantial available cash (as individuals have taken out some home equity as cash) -- thus putting more money in people's pockets to spend. Americans have used this "found" money to buy goods and services (such as new cars, which also benefit from the cheaper price of money due to low interest rates), which has kept GDP positive -- two-thirds of GDP is goods and services sold to consumers. (We'll overlook for the moment the potential for blow back.)

But the immediate question is whether the standard critique of discretionary fiscal stimulus was right for the typical post-war recession, but doesn't apply to a prolonged period of weak economic activity due to "post-bubble" dynamics of weakening household and business demand for goods and services -- such as we may be seeing now.

If so, are discretionary fiscal actions appropriate, and if so, what specific proposals to cut taxes or increase spending would keep the economy moving?

Ideas?
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Print the post  
UnThreaded | Threaded | Whole Thread (3) | Ignore Thread Prev | Next

Announcements

Pencils of Promise - Back to School Drive
"Pencils of Promise works with communities across the globe to build schools and create programs that provide education opportunities for children."
Managing Your Wealth
Our own TMFHockeypop from Rule Your Retirement fame on the TV show Managing Your Wealth.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Post of the Day:
Value Hounds

Mobileye's Growth too Hot?
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
Community Home
Speak Your Mind, Start Your Blog, Rate Your Stocks

Community Team Fools - who are those TMF's?
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and "#1 Media Company to Work For" (BusinessInsider 2011)! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.
Advertisement