Transcript The Economic Stimulus Package

The Economic Stimulus
Package
Group B: Bruce Cheng, Michael Guinn, Philip
Musterman, Michelle Quach, & Brian Swink
At Issue
Economic Stimulus Package
• a fiscal policy, monetary policy to boost
Gross Domestic Product (GDP)
• addresses the problem of…
Economic Recession:
• a decline in (GDP) that is successive for at least
two quarters
Economic Trends
http://www.culturaleconomics.atfreeweb.com/111%20114%20MBB%20Macro%20Graphics/Macro/Fig%206.1%20Business%20Cycle.jpg
Who are the decision makers?
• U.S. Congress
– House of Representatives
– Senate
• U.S. President
– Right to veto
• Federal Reserve
– Controls the interest rate
Considerable Options
• Main point - to redistribute money to consumers, so the economy
is stimulated through consumer spending
• Possible Proposals
– Redistribute 168 billion USD
– Tax rebates to everyone who received a paycheck in 2007 ($300$600/person)
– Families with children would receive an additional payment of
$300 per child
– Give businesses incentives to purchase new equipment such as
tax breaks
– Federal Housing Administration-to insure higher-priced
mortgages and to help homeowners threatened by foreclosure
– increase the size of tax payments for the working poor, increase
food stamp funds, and restore unemployment benefit extensions
Data & Information Necessary for
Model
• Examine current Economic Theory
• National Income and Product Accounts
– Bureau of Economic Statistics
• Previous economic incentive packages, how
they were implemented and if they were
successful
• Housing Sales, GDP, GNP, Inflation (CPI),
Interest Rates
• Tax Information from IRS
What Kind of Models are
Necessary?
1. Macroeconomic Models
– Deficit Spending Model
2. Money Generation Model
3. Federal Budgeting Model
Deficit-Spending Model
• To encourage private expenditures, government may
borrow funds from the foreign market, which increases
the national deficit
• Private investment is stimulated, that increases the
ability of the economy to supply output in the long run
• Variables for Model
–
–
–
–
Present consumption
Future consumption
Present Borrowing Rate
Representations of Utility Functions
• Individual’s well being (i.e. income)
Money Generation Model
• Show how much money is being spent
based on tax refund
• Based on percentage of state population
affected
• Possible generation of sales
– Sale tax on purchases
– Businesses
Federal Budgeting Model
• Shows the effect of refunds on the budget
• How to reallocate funds?
• Explain how refund will generate more tax
revenue
Addressing Needs in a DSS
• Eliminate/reduce unbiased results
• Information Sharing within decision makers
• Allow access to data and visual aids for decision
makers
• Have ability to drill-down for additional
information
• Compare options from model results
Problems with Data & Analyses
• Any budgeting model is based on projections
– Can’t predict the future
• The best and worst case scenarios are taken
into account
– What about in between?
• Data for the model comes from the IRS,
Government Accounting Office
– last audit claimed IRS and other gov’t. agencies did
not account for anything accurately
– figures should be suspect
Problems with Decision
• Decision to finance out of taxes or borrow
– If we borrow, are we using internal funds or
international debt?
• Does not account for the long term affect
– Borrowing against short-term consumption
• As a result, the question is…
*Is there a foregone use of the future?
Questions?