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Chapter 14 Fiscal Policy Index I. Economic Goals of the United States II. Discretionary Fiscal Policy IV. Effectiveness of Fiscal Policy V. Fiscal Policy Affects the Private Economy
VI. Seven Innocent Frauds of Economic Policy
Appendix 1 Great Recession Lessons
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CV-19 Stimulus was Massive
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Lecture Notes 1-page printable lecture notes
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It Worked
Post Great Recession Stimulus was small
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II.
Discretionary Fiscal Policy
G. How L.B.J. Pushed Through Kennedy’s Tax Cut BY BRUCE BARTLETT Are We Turning the Fiscal Policy Dials the Wrong Way?
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Political Economy Stuff
Source has much data
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III.
Automatic stabilizers A. Cause the economy to expand without government action during recession by increasing AD. B. Cause the economy to contract without government action during inflation by lowering AD. C. fiscal policy & automatic stabilizers - 8 min. D. Examples 1. Transfer payments (unemployment compensation, food stamps, and other social programs) increase during recession to increase AD. 2. Progressive taxes (income tax) increase during inflation to lower AD. 3. Importance of Automatic Stabilize 4. Automatic stabilizers not as good as they should be |
US Usually Spends Less
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But Quickly Adds to the Pot
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IV.
Effectiveness of Fiscal Policy A. Timing 1. Determining when recessions begin is difficult. a. Disagreement over whether the U.S. was in a recession from 1989-1991 resulted in little fiscal action being taken. b. The 2001 slowdown happened so fast there was not time for preemptive action. 2. Fiscal policy takes time to implement 3. There will be a delay because it takes business time to expand capital investment. B. Political considerations 1. Some spending programs are difficult to cut (social security, military, education). 2. Expansionary bias: people vote to spend but not to tax. 3. Political business cycle: it is difficult to accomplish anything economically constructive during an election year C. Recently, many felt the federal debt is too big and has rendered fiscal policy ineffective. Its success in ending the 2001 recession has yet to be determined although the Federal budget surplus certainly makes it easier to increase federal spending and decrease taxes although the expense of fighting three wars has again increased the deficit. D. In 2012 People Fear the Drag of Taking Away the Stimulus of 2009- 2011. E. Kansas Fiscal Policy Tax Cut Failed 10//17 B Ritholtz F. Fed Uncertainty of Economic Effects Of Tax Cuts. See Chart State and local cuts have very nearly run their course at this point, but the economy now faces the run-off of stimulus programmers, as well as the expiration of emergency unemployment benefits and, potentially, the expiration of lots of other tax proposals. The President's latest plan aims to move the total government impact on growth from a drag of about 1.5 percentage points of GDP to approximately even. When the economy is growing at between 1% and 2% per year, a 1.5 percentage point drag on output is a very big deal indeed. See Government Spending Might Not Create Jobs Even During Recessions
V.
Fiscal Policy Affects the Private Economy D. Trump Tax Act Still and Trickle Down Economics
Source: Seven Deadly Innocent Frauds of Economic Policy - Warren Mosler pdf
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Biden Wants More
Here is Why Hutchins Center Fiscal Impact Measure Modern Money & Public Purpose
1: The Historical Evolution of Money and Debt The Other Side of the Story
MMT vs. Austrian School Debate Modern Monetary Theory Videos |
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Appendix 1
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In Europe Austerity Was
Either Neutral or Destructive.
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Deficits Create Growth Leading to Wealth
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Federal Expenditures Lagged
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Great Recession Recovery Also Lagged
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Editor's Note: Fiscal Policy and the
Great Recession
A world-wide saving glut developed in the late 1990's as the Asian Crisis caused developing nations to be more conservative and accumulate mostly dollar reserves. Their resulting lack of demand created a positive trade balance and the need to create demand else ware to soak it up. The US did it's part with two unfinanced wars, a tax cut, and private debt expansion. In the initial months of the stimulus, the net government contribution to GDP growth was positive. As the severe recession impacted government budgets, however, state and local cuts mounted, ultimately offsetting stimulus at the national level. |
In U.S. Government Spending
Increases GDP
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Appendix 3
Debt Ceiling Deal
8/6/11 The
Economist
F. Raising Taxes In 2012 Not Same As 1993 from businessinsider G. Affect of Tax increases in 1937 |
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| Chapter 14 Class Discussion Questions Next Chapter Economics Internet Library |
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