GECON200-Topic #4: Recovery, Stagnation, and Deficits

The Economist recently published an article regarding the rising debt of the United States. It is currently anticipated that the national debt will double in nominal value in the next 10 years. However, many economists (Krugman and DeLong)are pushing for additional stimulus packages to try and spur a recovery and prevent a continued downturn.However, the political atmosphere is not very supportive of additional stimulus. Several members of Congress have denounced the effectiveness of the current stimulus. The New York Times recently quantified the amount of interest payments that the U.S. will be expected to pay in the coming years. The White House is even now less optimistic about any future stimulus according to a report by the Wall Street Journal.

The economy has now contracted severely, and the recent 3rd quarter GDP growth rate of 3.8% was revised down to 2.8%. Intrade, a site that allows for trading on all sorts of events, has published lower recession probability numbers in 2010, with the bets ranging around 25%, meaning that the probability output will contract at least two consecutive quarters in 2010 is currently put at 25%.

Questions you might try to answer:

  • Do you believe that the country needs more stimulus or less?  What would be the result of either adding to the deficit or reducing it? 
  • Do you think that additional tax cuts, government spending, or central bank action will result in an economic recovery, or do you believe the economy will stagnate even if action is taken.

First off. When writing your blogs, do NOT simply restate or summarize one of the articles that I give you to look over. You are supposed to be forming an opinion, and trying to defend your opinion using facts that you obtain from an article. If someone else has already used your statistic, you should NOT just use it again. You’re supposed to be finding information here in related articles.

I would like your statements to be as subjective as possible, or in jargon terms, positive and not normative in nature. Also, remember, I want you to keep your descriptions short, basic, and related to classroom content. Read other students comments before posting, and please leave your name with your posting.

46 thoughts on “GECON200-Topic #4: Recovery, Stagnation, and Deficits”

  1. I think that is important that our government, as well as governments around the world, contiune to have faith in the monetary and fiscal policies that they have implemented into their economies. The recent revision of the 3rd quarter's GDP from 3.8% to 2.8% shows that the government should slightly increase the stimulus package. The difference between the projected numbers and those that were actaully reported could be attributed to overestimating the effect of the stimulus. If this is the case, then it would be beneficial for the US government to increase the size of the stimulus package in order to help our economy. Because of our previous stimulus efforts, I believe that it is in our contries best interest to strenthen the stimulus instead of abandoing our previous plan for a new approach. "If we put the brakes on too quickly we will weaken the economy and the financial system, unemployment will rise, more businesses will fail, budget deficits will rise, and the ultimate cost of the crisis will be greater". We have to give the stimulus package a full chance to change the state of our economy and our government cannot falter in its resolve to see its decesions through.

  2. The United States government needs to seriously consider reducing the investment in the stimulus. The stimulus is adding to the already massive deficit, which sits at over $12 trillion right now (1). The main problem with this is the interest which will be collected on this $12 trillion loan. The White House is estimating that the government will owe $700 billion a year in 2019 (1), and additional stimulus spending will only increase the budget deficit, and increase interest rate payouts in the future. Most Americans are already in debt as their “personal wealth sank along with housing and stock prices” and now they will have to be in even more debt because the government’s huge debt is catching up to them. During his administration, President Obama promised not to raise taxes for 95% of households (2). But the government will most certainly have to raise tax revenue to start paying off the budget deficit. Surely they realize that with each passing year, the interest on the stimulus spending adds up. Also, increased spending puts more money into the economy, which could very well cause inflation (2). I definitely think we need to stop spending more money on stimulus bills and instead, think of a “credible plan that would reassure markets and allow an orderly exit from fiscal stimulus” (2).1)

  3. With the growth rate of the American Economy decreasing from 3.8% to 2.8% it is obvious that the government has to act. The American government should allow for an additional stimulus package to jumpstart the economy. The Economist wrote an article about the current situation of our economy and states that “Uncertainty over how taxes may be raised to shrink deficits may already be weighing on business confidence.” However with the stimulus supporting businesses tax increases would not be as necessary or severe and therefore businesses would be more confident and be able to prosper and grow. America needs to overcome this recession and the best way to do that is to increase the stimulus package. G. Baker

  4. In the face of severe economic downturn, both economists and politicians have developed several potential solutions to perceived risks. As the United States’ deficit continues to rise over $1.4 trillion, many officials are finding spending issues at the root of the problem (1). According the Economist article, “spending must bear the brunt of adjustment,” and specific policies must be targeted (2). I agree that both a raise in the retirement age and more state control in regards to Medicare and Medicaid can aid in a decrease in government spending; however, there are others options that must be considered. Before the government can implement a smooth stimulus exit, sufficient stimulus must be provided. I agree with Paul Krugman in the fact that additional stimulus is needed to repair our economy. I do also feel that this stimulus will not support us forever, and that we will need policy makers and economists to work together to determine an appropriate time to gradually remove stimulus measures. It is essential that politicians work together with economists to solve the various problems in today’s economy. Without cooperation, there will be no solution.(1) Williamson, Elizabeth. “Weighing Jobs and Deficit.” The Wall Street Journal, November 24, 2009. “Dealing with America's fiscal hole” The Economist, November 19, 2009. Krugman, Paul. “Second Stimulus Needed to Avoid Lost Decade.” Wall Stree Pit, August 10, 2009. Trani

  5. This stimulus package has already come to a total of around $12 trillion dollars. With most of this money being borrowed from other countries, compounding billions more in interest payments the United States will also have to pay back. The United States already has plenty of debt and should not continue to add to that debt. While the Obama administration has promised to keep taxes unchanging for the lower 95% of the population, this is not feasible past his years as president. While he is in office that top 5% will receive huge tax increases, and once he is out of office the next president will have to increase taxes on a broader spectrum of people to begin to chip away at the huge debts we already face. While extra money would certainly help the economy in the short run, it will hurt it in the long run. People will be paying off this debt for many years to come as it stands. While the interest payments we have now are low and seem too good to be true, they will begin to grow as the world’s economy rebounds and the interest payments on this debt will also increase substantially. The government has already intervened enough in the economy as it stands. The amount of money already poured into the stimulus package was expected to boost GDP, but it didn’t help at all. So, extra money may not help to boost those numbers either. Time will help to swing the US out of the recession and into a recovery, not trillions of extra dollars.

  6. I think the government should continually decrease it’s stimulus package by less and less from the point it is at currently. A steady decrease would lower our amount of debt, and it wouldn’t make citizens angry, like a sudden cut of the stimulus would do. With debt so high, we really cannot afford to have an increase on stimulus spending. The federal debt, which last year was 41 percent of GDP, is expected to double in the next decade (1). Increasing stimulus spending only insures that federal debt will increase. Though citizens may be happy at the present moment, with increased stimulus spending in the future, they will not be happy in the future. Despite how the stimulus package may reduce current debt and could stimulate the economy, it is not worth it to continue having high stimulus plans (2). With a debt that is estimated to cost the government 700 dollars or more in 2019, there is definitely no need to increase the stimulus spending (3). Also, the recent increases of the unemployment rate show that these stimulus packages will not be as effective in the future. How is the economy going to be stimulated without people working? If the government steadily lowers the amount of the stimulus package, along with decreasing government spending, the economy will be much better off. 1. Robinson

  7. After Obama’s original stimulus plan I believe that adding to the current government deficit will only worsen our current situation. With the current stimulus plan it will cost $6,700 of debt per family. This is not a plan that will help stimulate the economy but a plan used only to help certain government institutions. The problem is that we need more individual citizens to make decisions on how to spend their own money and not the government. The government brings too much politics into the situation and ends up taking care of the wrong institutions in order to recover our economy. Therefore more stimulus is the wrong way to tackle this problem. First, I believe we need to do the exact opposite of Obama’s stimulus plan and instead lower tax rates. Eventually this will lower recession and slowly create jobs. More government spending will only worsen our debt, which will be paid for by the current youth of America, and create inflation. Romaniello

  8. I believe we need an additional stimulus plan to keep the economy from going into a major depression. According to Krugman, a professor of economics at Princeton University, “More stimulus measures and drivers for investment are needed if the economy is to avoid the fate of Japan in the 1990s.”(1) A second stimulus plan will put more money into the economy which can easily be pulled out if inflation is to occur. Delong, also, supports this theory. In an article written by Delong he states “We could cushion the impact of another big downward shock by a lot more deficit spending–unemployment, after all, goes down whenever anybody spends more…” (2) As unemployment rates rise, American’s worry about our economy’s future also increases. As of right now, the best solution would seem to be to add more money into the market and let spending increase, therefore creating more jobs. A second stimulus plan could help the economy from going into the next Great depression, and if it doesn’t work the money can always be pulled back out of the market.1. Danaher

  9. With federal debt predicted to double in the next decade, I believe there should not be a second stimulus package enacted because it could put the United States in an unrecoverable situation. The New York Times says “With about half of the February stimulus spending spoken for, the measure has created about 640,000 jobs, fewer than the number of jobs lost in January alone” (2). Obviously our attempts such as these don’t have anywhere near as much of an impact that they should have on our economy given the current situation. Not only is our current stimulus package not effective but if we were to enact a second stimulus package our country could face an even larger economic crisis. We have already spent $787 billion for the first stimulus package in February and the current unemployment rate is even worse than it was at that time (2). With that being said the stimulus packages aren’t working and we need to devise a different plan to help with our current economic crisis. Obama has future goals such as raising the retirement rate and eventually raising taxes. These might be good ways to earn back some of the debt that the country currently faces but “spending cuts alone cannot deliver enough” (1). Other ideas such as ways to earn back money without hurting the economy and finding alternative plans to help the job crisis are in desperate demand. The United States can not jeopardize more of their money in hopes that the second stimulus package will have a different effect on the economy after the first stimulus has shown poor improvement for the unemployed. (1)

  10. i believe that even if our country does add additional tax cuts, government spending, or central bank action that we will always be stuck with some kind of government debt, but i do believe that we can start to eliminate it if we use these tools properly. I believe that by putting these actions into place we will help the economy to some point but in the end we will never reach the goal that we want to get to. According to the first article, it says that spending is the essence of the problem so i do think that if we change our government spending we will reach some sort of goal whether it be what we had originally planned or something close to it. In the same article they talk about taxation but if we do not use our taxing powers in the proper way i do believe that it will end up hurting us more rather than helping us solve the problem. i believe that if these tools are used in an intelligent and proper way that we will be able to at least start to eliminate the debt that we have gotten ourselves into over the many years.

  11. Adding another stimulus will be bad for the economy. In theory the stimulus was a good idea; however the U.S. debt is now over $12 trillion dollars because of the effects of the stimulus. (1) Adding a second stimulus would only increase the deficit even more and not stimulate and economic recovery. If one did not work, then why would two? The jobless rate continues to grow even after the attempt of the stimulus to create more jobs. (2) Until the current stimulus creates jobs, I do not think that an additional stimulus would be beneficial at this time. According to the National Association for Business Economists President, Lynn Reaser, during the next couple of months businesses will begin to create jobs, instead of “cutting” them. (2) Once that happens and the economy begins to turn around, we might be in need to something similar to a second stimulus. (1) L. Burton

  12. The last thing that this country needs is more debt by the implementation of an additional stimulus package. The dollar continues to weaken and unemployment continues to increase; signifying the failure of the current stimulus program. Why would the government want expansion of a program that is already not working? I like the proposed idea in the Economist to increase the retirement age. People are living significantly longer, and therefore should work a longer amount of time. This would decrease the amount of money that is spent on medicare and social security and increase the revenue for these programs. In addition, I think that passing the Healthcare Reform bill would be disastrous because there is no way that this country can afford a program that has proven to be ineffective in so many other countries. The government seems to only want to increase the debt, when they say they want to decrease it. The government leadership wants to keep adding programs and adding additional taxes as Pelosi states in the Wall Street Journal. However, when taxes increase, this discourages people from spending money. A. Young

  13. It’s not all a matter of cutting government spending, but rather reorganize were this money goes. The main priority of the American economy is creating jobs. “The jobless rate, which hit 10.2% in October, has continued to climb despite the implementation of a $787 billion stimulus package in February. “(1) The question is how much are these packages helping the US economy? Adding to the deficit might create economic stimulus for now but will leave our prosperity with large debt. “With the national debt now topping $12 trillion, the White House estimates that the government’s tab for servicing the debt will exceed $700 billion a year in 2019” (3). Another solution could be a resituating of tax policy, America taxes consumption too little and income too much (2), this is more supporting of economic stimulus. This might encourage new business owners which can create jobs. I think the ideas in the wall street journal about job bills and unemployment aids can be a good to contribute to creating of jobs as well. 1. cecil

  14. The issue of our national debt is alarming, especially to the younger generation that should be concerned with the long run outcomes. Personally, I feel that enacting another stimulus plan is costly and risky, since the previous one failed to provide relief. Our country needs to take baby steps to alleviate this expanding crisis. “Raising the retirement age for Social Security and Medicare would save money while encouraging Americans to work longer, thereby expanding economic potential.” (1) This would be especially effective since the baby boomer generation is reaching an age of the mid 60s. Another option would be to raise taxes. Although it would anger most Americans, we need to remember that changes now will potentially benefit our society in the long run. With the newly proposed tax on financial transactions, “Democrats estimate such a tax could raise as much as $150 billion a year, a pool of money that could help offset the cost of a job-growth package.” (2) These changes could put us on the right track to recovery, however, we need to work hard to keep interest rates low. “An increase of one percentage point in the Treasury’s average cost of borrowing would cost American taxpayers an extra $80 billion” (3), which is something we clearly cannot afford.(1) control O'Connor

  15. Even though “other rich countries with far bigger debts relative to the size of their economies, from Italy to Japan, have soldiered on without hitting a wall,” the United States cannot think that our economic situation is acceptable (1). Something must be done, but adding more money into the stimulus and potentially doubling the federal debt in the next decade is simply not the answer. The government needs to raise the confidence in the people in order for their expectations to make the inflation rate go down which will then increase consumption. Since government spending is a main contributor to the current deficit, a universal health care system would only hinder our economy even more. Adding to the stimulus would not guarantee a recovery for our economy and I do not think that it is a chance that our country can afford to take.A. Eikenbary1.

  16. The U.S. is in for a huge wake up call. With trillion dollar a year spending and interest rates that could rise at any time, who knows where the government will look next for money. Right now the U.S. has a national debt of 12 trillion dollars…and this does not include the 500 billion dollars a year for interest. The Treasury is desperately trying to exchange short-term borrowing for long-term bonds because a payment shock is sure to occur once interest rates rise again. There are many questions the government and Americans are asking. Adding on to our debts: there are soon to be more expenses for the retiring baby boomers. Social Security and Medicare taxes will explode and tax-payers are wondering, who will ultimately shoulder the burden? The minimal interest we have now in trying to stimulate our economy, cannot last forever. And when the interest bubble pops, we will be in for a real payment shock. With all these debts, how can the U.S. afford stimulus packages? Without stimulus, however, consumption and the American economy will surely crash. Stimulus, even though costly and risky, could be the essential that will boost spending therefore put the economy back on track.Cassandra Lenski1.

  17. Political ideologies aside, it’s more than obvious that our country is facing an economic problem and it has to be approached in a new way. Our last stimulus package helped, but not as much as we planned for and it only added to our country’s massive debt which is collecting more and more interest, over $500 million extra interest expense per year according to the New York Times article. According to The Economist, “On current policies the publicly held federal debt, 41% of GDP last year, will double in the next decade.” After reading about how deep our hole is becoming, I disagree with Krugman and don’t think our country needs another stimulus. As much as it seems like we’re spending less, there is still much more to be cut back on and it will add up. Cutting pensions and health care will only get us so far but it’s a start; raising the retirement age would not be a popular decision but may be necessary in the long run. Implementing taxing policies will help a great deal as well, especially dealing with carbon emissions. The Economist article suggests a broadened income-tax base, a carbon/raised fuel tax, and a consumption tax, which all seem to be viable at this point. Nancy Pelosi’s proposal of taxes on financial transactions could raise up to $150 billion per year (Wall Street Journal). We aren’t too quick to take action, however, because according to The Economist article, “Uncertainty over how taxes may be raised to shrink deficits may already be weighing on business confidence. Worries about inflation or default could start to push up interest rates. Eventually, private investment will be crowded out.” Our country will have to work harder than ever but a debtless America is possible one day, even if it’s a day my generation will never see. I do believe that our country will stagnate, however, if action is not taken.-Nate Solow

  18. Apparently it seems that the first stimulus package aimed to help our economy did very little to help at all. It seems that most of the money given as handouts to help boost American production measures was spent overseas buying foreign made technology from nations such as China. As I see it, the government remains solid in their approach to promote US spending by issuing tax cuts for college tuition, home buyers, and the production of renewable energy sources. I think the situation with the housing market and the unemployment rates have severely hurt the governments chances of promoting spending within the American public. Personally, I would be critical of someone that was not inclined to put their money from government tax cuts in a safe financial establishment or use those funds to help pay off debt or loans that have accumulated. The only way I can foresee a stimulus plan working is if the payments were made yearly around a common time for all. The public could anticipate an influx of money at a certain period and this could potentially promote spending around important economical times such as the holiday season. I see a one time stimulus as a delay to the problem resulting in more debt and more problems for the economy. This would ultimately increase the deficit but at this point should the American debt be a major concern? I don’t foresee the US government being able to pay off eleven trillion dollars at least not in the lifetime of anyone in this class. C. Powles

  19. I see the stimulus package as a band-aid that is covering a cut. The band-aid is going to do its job of trying to help heal the cut. Just as the stimulus package is meant to stimulate the economy therefore helping heal the recession that we are currently in. But the truth is that we are going to have to work with the band-aid (stimulus package) that we already have. If we get a bigger band-aid the country will be paying interest on our debt forever. The New York Times article states that the interest payment on the dept we have already accumulated so far will be 700 BILLION in 2019. 700 Billion dollars will have to come out of the US budget to pay that interest, and that is just interest on the debt that is not even the debt itself! No band-aid even if it was the size of Texas will heal a cut that is so deep in the American psyche. The American public and government has been living beyond its means for decades, expecting an unbalanced budget, far reaching debt will just heal itself magically. We have borrowed against our future and now the future has come and we need to change things. A cut will never stop bleeding, no matter the size of the band-aid, if the person doesn’t clot the blood. Right now the US is bleeding and needs to learn to clot the blood. We have over a 10% joblessness rate (Wall Street Journal article), a federal debt equivalent to 41% of the GDP (The Economist article), and a government that is spending money like it has it in the bank. Things are going to need to change on how we spend money, and on what. And those choices are going to have to be made soon before we dig ourselves a whole we can’t climb out of, or we run out of blood so there is no more left to bleed.-Sara Dolinger

  20. With the chances of our economy facing another Great Depression I feel that increasing our stimulus would only worsen the national debt that is now at $12 trillion. I think the most important issue to focus on is getting Americans out of debt and lowering unemployment rates which hit 10.2% in October. Our country needs to focus on saving rather than spending however from the looks of it the United States isn’t saving money, its spending money that was supposed to be saved for future purpose. In the article Payback Time it was stated that “not until at least mid 2010, the Fed will be able to start raising its benchmark interest rate back to more historically normal levels.” With that being said why would one want to increase the stimulus package when the first one didn’t even work? Although Krugman stated that having more stimulus money is essential for a sustainable recovery as well as how “it’s quite easy to pull money out again if inflation starts to loom,” I have to agree with the recent survey released by the National Association for business that states many economists suggest that the best way for America to have a solid recovery would be to ensure that jobs would be created beginning in the second quarter of 2010. Winchester

  21. In essence the deficit and recession the United States is experiencing currently is due to a spending problem. (1) The United States is spending much more than they should be to try to revamp the economy. Currently no one is too sure as to how to get the economy to a growing level. I do not think that spending large amounts of money on our current stimulus package is the way to go. It is not right for the government to abandon the current program, but instead to rethink a new program and can be slowly introduced so we do not end the current program abruptly. The bad news of trying to pay off our current and/or new debts by borrowing money may be too good to be true. Once the Fed declares the "emergency" over with then they will raise interest rates once again and that will mean that we owe even more to those countries that we borrowed from. (2) The fact that the United States was able to borrow with such low interest rates is slowly diminishing. The reasons why the rates were so low are fading away and signs that the interest rates are going to be going back up are beginning to creep in. On top of the fact that the United States deficit is not getting any smaller the amount of unemployed people in the United States has not improved either. The amount of people out of work in our country is not a good thing because it forces people to rely on the government for programs such as welfare. The government needs to really consider other options to lower our deficit and to bring the country out of our recession because right now the stimulus packages that have been attempted have not done much more than add to the already huge budget deficits. 1. Baroffio

  22. With debt increasing and possibly doubling within the next year or so, another stimulus package should not be added, at least not right now. Krugman believes that “more stimulus money is key for a sustainable recovery.” (1) The stimulus would add to the already $12 trillion deficit we have now. (2) Adding to the deficit now probably would not cause many problems in the next few years, but in the years that follow that, there would definitely be a problem. (3) First, the health care financing needs to be solved before moving along with any type of stimulus package, if one were to be added. “The nation’s oldest baby boomers are approaching 65, setting off what experts have warned for years will be a fiscal nightmare for the government.”(3) The government should not be trying to fix so many problems at once because the governments money is then going towards so many different things and no one problem will ever be fixed. Adding an additional stimulus might not be able to support the country long-term. Waiting out this recession is probably the best that could be done right now instead of spending trillions of dollars more than what the government has already spent. D. Chithpravongsa1.

  23. Because of the staggering decrease of the American economy’s growth rate from 3.8% to 2.8% an additional stimulus package does not sound like a bad idea. Although America’s deficit continues to grow a continuation of the previous stimulus can only help our struggling economy. The rise in inflation is one major concern when it comes to the influx of money into the economy but with the government system that America runs the inflation could be easily offset before it could do any harmful damage. Paul Kruman, an economist from Princeton University stated that, “You have to understand that putting money in the system, it mostly just sits there. It’s quite easy to pull it out again if inflation starts to loom.” This statement should reassure the public that although our debt will continue to grow, the new contributions to it would be going directly to the recovery of our economy. People who disagree with the package seem to believe that there are alternatives to fix the problem then the stimulus, but do not seem to have any exact plan yet. Whitehouse deputy press secretary Jennifer Psaki explained that "There is no discussion of a package like a second stimulus, but we are working closely with Congress and consulting with outside experts to determine the right policies and the right steps.” Most of what is being said throughout the many websites involving this issue seem to be extremely contradicting, some saying a second stimulus is the only options while others swear it will ruin our entire economy. I feel as though we can learn by example, and stimulus packages have worked in the past and at this critical time the government does not have any time to waste and should begin work on a bill to save or stimulate our economy as soon as possible.

  24. When thinking about a stimulus, we must think about all the results. While there might be a larger budget deficit, a stimulus would help create jobs, such as the current Recovery Act (1). While there hasn’t been any jobs added, this is expected to change in April 2010(2). What really needs to happen, against most American's wishes, is an increase in government taxation. Adding a tax on different financial transactions could bring in about $150 billion. This would allow for a new job-growth package (2). Additional tax cuts might not add to the deficit, but would certainly make it more difficult to fix the current problem. If taxation is increased, this will cause more people to retire which will only add to the job market (3). With more jobs, our economy can have a normal recovery.Courtney Walker1. 2. doepke/teaching/textbook/dls_ch13.pdf

  25. The U.S. is already holding a deficit of $1.4 trillion, which stresses the issue of our nation’s debt that will affect the future generations to come. With the economy falling in such a condition, America needs to consider two things: 1) accepting higher taxes 2) working past retirement age. The $787 billion stimulus package that was last implemented clearly is not enough as the unemployment rate rose to 10.2% in October (1). Not only did the package add to the national debt but our country is still has ways to go before recovering normally. However, even if Obama had promised tax cuts, it is best that Americans raise the taxes they pay. Nancy Pelosi, House Speaker had said that the House is considering a tax on “a variety of financial transactions.” With such a tax, as much as $150 billion a year could be raised (1). This money could contribute to a job-growth package and more or less discourage consumption, which is another problem of America. The drive of the deficit situation would be America’s spending. The growing of age in population and the health care inflation is driving up the costs of Social Security, Medicaid and Medicare (2). The retirement age should be set higher so people work longer. The nation’s oldest baby boomers are hitting the retiring age of 65, meaning more money will be spent on healthcare and whatnot (3). By changing the age requirements for the benefits, the economic potential will grow due to the output of the working force and more money will be saved from Social Security, Medicare and Medicaid. Besides this, more jobs will be created, which in turn stable the recovery for America.1) Phung

  26. I believe that increasing our stimulus, in the long run, is a very bad idea. An increase in the stimulus in the short run will temporarily put more money into our system and thus be progressive. However, in the long run, it will ultimately add to our increasing debt and make it even harder for our generation to pay it off. One reason I do not think another stimulus package would be affective is because the original stimulus plan (which was enforced in February) cost about $757 billion, yet the 10.2% unemployment rate continues to rise with no real end in sight. According to Kurl Karl, chief U.S. economist of Swiss Re, "It would aggravate all the concerns about the deficit. It could get interest rates going up and could harm the economy.” I think the best idea for our situation is for the government to not enforce another stimulus, but yet create another program which will create more jobs, but not add to our incredibly large debt. I think part of this plan should be to instill monetary security and confidence with the American people. I believe the media’s discouraging report on the recession and our current economic situation has unintentionally forced Americans into a state of monetary dormancy. Overall, I believe another stimulus package would do more harm than good and if the government wants to turn things around, they must somehow reinforce confidence and stability in the wallets of Americans. Downs

  27. It is not the deficits in the next few years that are the problem, but it is the deficit in the years to follow. Already issues are beginning to arise about how taxes should be increased to decrease deficits. Congress and Obama need to take definitive action to reduce the deficit now. To combat the rising deficit, the government could save money while encouraging Americans to work longer as well as raising the age of retirement for Social Security and Medicare. Additionally, forcing states to bear "more of the burden of cost control" of Medicare by blocking grants could help. Cutting spending to stop federal funds from being wasted on "highways of dubious value or trade-distorting farm subsidies." However, cutting spending alone will not eliminate the deficit and any changes would have to be made gradually. Americans do not want to pay for healthcare reforms; they want the government to pay for healthcare, but the government has no money to do so. Obama has already promised not to raise 95% of Americans taxes, but what else can he do to combat the costs of his predecessor and the growing costs being incurred by his administration? Raising taxes will be less damaging "if the tax system becomes more supportive of economic growth in the process." With due time, addressing the imbalance between taxation on consumption (taxed too little) and income (taxed too much) could help stimulate economic growth. As the international economy recovers, all of the government debt is more likely to put pressure on the Fed to increase interest rates as fears of inflation fester. A plausible plan would be to "reassure markets and allow an orderly exit from fiscal stimulus." It's time the federal government thought about the future generations by saving away now and beginning to work on lowering the national debt.S. Scharf

  28. Obama economic stimulus plan disadvantages. Scientifically, stimulus is something that causes activity or growth. In a comparable way, an economic stimulus is an effort by the political class to stir a nation’s economy back to it wheels, normally by increasing expenditure on infrastructure projects and cutting of taxes. Governments stimulating their economies often have to borrow a great deal in order to fund such packages (Davis, and Obey, 85). Recently a new stimulus package worth $787bn (£548bn) was recently signed into law by President Barrack Obama. This stimulus plan included aid to the US states, additional spending on infrastructure and tax cuts. These plans seem very feasible but the amount of national debt that we are incurring may come to haunt us in future. Currently the national debt stands at USD 12 trillion which is more or less 40% of our GDP. Economists estimate that the percentage of the debt may be 90% of the GDP by 2017 if government borrowing is not put in check. These are very grim figures and this economic stimulus should be stopped. Many people in the US know that the first economic stimulus plan did not achieve much and the question they are asking is why the political class wants to incur even more debt on something that has been proved futile? Obama promised that 95% of the population will be receiving tax relief till the economy recovers but in reality how prudent is this? The tax relief means that the budget deficit will continue to in crease and to reduce this deficit will require him to externally borrow more. This will plunge the economy into more debts and future presidents will be forced to tax the population even more to be able to fix the budget deficits and to help pay the loans. The best way for the government to help the economy grow is to create good business environment that make people want to invest other that stimulating the economy with borrowed money and incurring more debts.-Nicole Abin Kim-Work cited 1) Andrews, Edmund. New York Times. November 22, 2009. Retrieved on Dec 03, 2009 from 2) Davis, Christopher,. And Obey, David. Economic Policy Crisis and the Stimulus: Analyses of the American Recovery and Reinvestment ACT (Arra) of 2009 HR 1, 111th Congress. New York: The Capitol Net Inc, 2009. 3) The deficit problem. The Economist. Nov 19th 2009. Retrieved on Dec 03rd, 2009 from

  29. Will Kidwell,The previous stimulus bill didn’t do much for the United States economy except for put it into further debt. The government should focus on tax cuts for corporations who rehire employees. With the 'current unemployment rate around ten percent’, the United States economy is producing well below potential output. If the government were to issue tax breaks, it would make hiring employees cheaper for firms. With more employees, firms will be able to increase output. The increase in output would not go wasted, as more people will jobs and money to spend. The federal government should consider tax breaks before issuing another stimulus bill putting us billions of dollars into further debt.'s_Most_Popular

  30. The First massive stimulus package has been enough. Sooner or later the tax payers are going to pay off the massive debt we have accumulated already. According to EDMUND L. ANDREWS of the New York Times, "the government faces a payment shock similar to those that sent legions of overstretched homeowners into default on their mortgages." We are currently paying off the national debt at a rate of $202 billion. This is expected to Raise to above $700 in the next 10 years on the first stimulus package alone. Analysts are also predicting that the jobless recovery should end soon with the raising stock prices. The NABE President Lynn Reaser said "While the recovery has been jobless so far, that should soon change. Within the next few months, companies should be adding instead of cutting jobs" Our economy is slowly expanding now. If the government spends more to stimulate the economy too much, we may very well be worse off than now in the long run.-ryan waldron

  31. The US economy is in serious trouble even after a 700 billion plus stimulus package. Does the United States need to increase stimulus and inject the delicate economy with even more cash, or should it be left to the free-market? This has been the debate over the last couple months, and it is hard to draw a line between the two sides. Middle ground may indeed be the best option. On one hand we see an ineffective stimulus package that has carved a huge hole in the government budget, which could have some disastrous consequences in the future. A larger national deficit will raise US debt above the G 20 average, putting the most important security in the modern world, US treasury bonds, in jeopardy. On the other hand, complacency is not an option. The unemployment rate was at 10.2 % in October, so it is important for the government to keep the economy from reaching Great Depression status. So what can they do to increase job recovery without increasing the deficit? Increasing taxes is a good way for the government to raise money, however, President Obama has made a point to not raise taxes for 95 % of Americans. This will reduce the options for tax revenue. Carbon tax is an idea that I believe could work because it will help the US reduce emissions and reduce deficit by tax increase. An additional stimulus package of the magnitude of the first is out of the question due to the deficit and its overall ineffectiveness to jump-start the economy. I also like the idea of the government investing money to the energy sector because it is an evolving industry that could create a lot of jobs. Rego

  32. Although another, heftier stimulus plan is risky, I believe that the payoff would outweigh the addition to the already severe national deficit. "Right now I think the world as a whole kind of looks like Japan in the early 90s. Not a catastrophe, but we really don’t know how we get serious growth going." (1)In order to avoid chaos, the government has got to begin to act now as opposed to worrying about debt in the future. "The problem is not the deficits in the next couple of years, but in the years that follow." (2)Although the future is important, what we do now can affect what may happen in the immediate future, especially when Wall Street is concerned. To ease these worries, I believe the key to not having the stimulus plan go out of control is to have a gradual stimulus. A gradual approach would lead to slowed inflation, which would give employers more money to give out larger paychecks.With greater incomes, people would then consume more. By doing this slowly, the recession will reverse in a controllable manner before inflation gets out of control. For those worried about the deficit, however, I recommend that the government put aside large government programs that we cannot afford under the given circumstances. "Mr Obama has long promised that health reform would cover the uninsured without adding to the deficit, while reining in long-term costs. Unfortunately, the prospects for controlling costs are tenuous." (2)Although health care reform is a great idea for our country, I don't believe that now is a good time to be spending money to do anything but boost our economy out of the recession.(1) (2) McClure

  33. The American Government faces many obstacles in regard to our failing economy. Each of these obstacles, is also paired with intense scrutiny and criticism of the many possible solutions. President Obama and his administration need to find the simplest and most efficient solutions. The decreasing value of the dollar and the possibility of a severe and irreversible economic crisis have frightened us all, but the United States still remains a powerful and respected country. Although an economic turn-around will not occur over night, with years and years of extensive borrowing behind us, it is definitely possible for the government to continue adding to the deficit for another few years without a complete downfall of the economy. An open market economy is all well and good, but the actions of our society are the ones that have demanded a government bailout. It is impossible to begin tackling the massive government debt when our economy is in shambles. This being said, it is crucial for the stimulus money to be well spent. The government should consider options such as increasing the salaries for primary and secondary education teachers. Making this profession more prestigious, and getting the finest teachers into public education at the same time. Similar programs could be applied to inspire more citizens to works in hospitals, assisted living homes, and indirectly help the health reform movement. I think that we need to continue spending stimulus money, but be sure the spend the money wisely by combining many of the government projects and movements in order to get the most effective results.eparr

  34. After reading the article, Weighing Jobs and Deficit by Elizabeth Williamson, I think that our country needs more stimulus. This is due to the fact that with stimulus comes the creation of jobs, which will place more money in the hands of more Americans. In the stimulation of our economy, it is possible that people will decide to consume more goods and buy more with the newly made money they will be making. Williamson discusses the shocking rate of unemployment and the reason for so much debate surrounding the issue. The main problem associated with unemployment and the creation of jobs is the amount of money that the U.S. needs in order to create such jobs. She says, “With about half of the February stimulus spending spoken for, the measure had created about 640,000 jobs, fewer than the number of jobs lost in January alone.” This shows the reader that with the implication of more stimulus, there should be other measures taken as well. By taken more actions and not just those that deal with increasing the stimulus; the creation of jobs has a better chance of success. I think that the primary concern right now is to lower the unemployment rate and increase the amount of money that consumers are putting into the economy at this point in time. With more consumption comes more money that is able to be moved around. Unemployment is one of the main causes of our current sticky situation. Placing more people in jobs and creating more stimulus will ultimately help our economy to get back on track. c. shott

  35. According to the article Payback Time published by the New York Times, it seems like it is inevitable to keep the interest rate as low as it is now. The central bank has no choice but to increase the interest rate because we do an abundant amount of borrowing, which only hurts the amount of debt the United States currently had. “An increase of one percentage point in the Treasury’s average cost of borrowing would cost American taxpayers an extra $80 billion this year” This is very detrimental to any tax payer’s pockets. $80 billion is not cheap. If the opportunity cost of raising the interest rate by one percentage point means paying an additional $80 billion worth of taxes, it would mean that the amount of consumption would fall greatly. The more taxes we have to pay out of our pockets, means the less consumption or investment we would want to do. However, in the long run this increase would help to pay off a long-term debt. Therefore, I am pretty sure I would be willing to take a hit if it will not only save me money in the long run, but help our economy recover from this recession. A. Ou

  36. I personally think the country needs less stimulus because although it may be putting more money back into the economy in today’s society it’s causing future generations to have to pay a fairly large amount of taxes to recover from the extreme debt the country is creating for itself. According to the New York Times the US will have to pay $500 billion a year just for the interest on the already extremely high debt. The large debt In the future will decrease the money circulating in the economy, which will in turn decrease consumption. Currently the stimulus is suppose to be increasing the consumption, but it will only be decreasing it in the future. I think to decrease the amount of taxes on future generations; the taxes should be slightly increased in today’s society.

  37. I believe that our economy needs additional stimulus, it is indeed true that our deficit isincreasing and has reached levels that should concern every tax payer, and however, I believethat this issue should be assessed by looking at what should be done in the short run and the longrun. In the short run, the most important problem is to come up with policies that will createemployment and end recession. John Maynard Keynes postulated that the only way to recoverfrom a recession or economic downturn is to create effective demand. Therefore, while I agreethat our deficit which stands at $12 trillion dollars as reiterated by Shruti, and other bloggers, thetruth is that the current recession was more or less a correction in the market and thus one we canrecover from (Miami herald 2008) & (Somerville, 2009).In the short run, given the state of our economy, constricting the economy by reducingdisposable income and government spending so as to reduce our debts is counter productive. Asreiterated by Grant Morgan, our economy has to be jumpstart, America as an economy has veryactive, advanced and efficient financial sector, a very lucrative and effective production sectorand the linkage between the two sectors (production and financial sectors) is commendable.Furthermore, looking at our history, our rapid growth was fueled by high spending culture byconsumers making our economy vibrant and one that supports sustainable growth anddevelopment. To this end, introducing a stimulus will automatically boost economic activity,reduce unemployment, and create effective demand since public confidence will be restored.Ultimately, the economy will revert back to sustainable growth and development path (MiamiHerald, 2008).Therefore, in the short run the stimulus package is meant to boost the economy back to adesirable path as noted by Somerville (2009), “Government policy has to provide a bridge togrowth led by the private sector.” In the long run, however, we should introduce policies thatwill reduce our current status because $12 trillion is a huge debt and a burden to our taxpayers.The economy is seriously indebted and this can lead to very serious problems including makingimports expensive and reducing growth and our ability to trade internationally. To this end, it ismy belief that in the long run, the government should eventually reduce spending, increase taxesand make plans to reduce our indebtedness to a manageable level, The economist (2009) heldthat “Raising tax revenue will hurt less if the tax system becomes more supportive of economicgrowth in the process.” We can infer from this phrase that we cannot start constricting theeconomy before it gets back to its feet, therefore, the stimulus package –at least for now – is theright way to go. Jeon

  38. The government has been trying this entire year to develop plans and strategies to help the economy start to climb out of this recession, but I am not sure what it is working properly. Unemployment rates still have gone up. Elizabeth Williamson states that in October unemployment hit its highest 10.2% and still it continues to grow despite the stimulus plan that will be implemented in February. Senate Minority Leader Mitch McConnell makes a good point that Congress needs to repeal the balance of the stimulus package and plow it into deficit reduction because it has not put enough Americans back to work. I think the government needs to stop coming up with several plans and devise a good one or two plan to help with deficit. Spending money will not bring the economy back where it needs to be because the government has enough debt already and needs to start paying it back before there is no more money to borrow. Interest rates are rising and the debt is not disappearing. An action needs to be taken. Paul Krugman makes a good argument that more stimuli are needed, but we are not heading towards a second depression. There needs to be better and higher inflation and interest rates for the start of some type of recovering. Inflation rates do not change over time. Time is the key to help the new stimulus plans be enacted and for the government to slowly start paying off their debts. The government will pull themselves out of this recession and into recovery. Williamson, Elizabeth. “Weighing Jobs and Deficit.” The Wall Street Journal, November 24, 2009., Paul. “Second Stimulus Needed to Avoid Lost Decade.” Wall Stree Pit, August 10, 2009.

  39. When looking at the economies depressed numbers, it becomes painfully apparent that the US has waited far too long to deal with the debt that has been looming over us for some time. Sadly, increasing taxes will not be enough to dig us out of this hole. While expanding income taxes may sound good in theory, there's no way the majority of Americans will be in line for this decision along with the decision to implement more taxes for consumption. Thus, the politicians, including President Obama, would have a severely difficult time passing legislation, while in the meantime our economies stagflation increases. Paul Krugman bring up the valid point of lowering interest rates to stimulate investment. most note-worthy is his idea of businesses taking advantage of the "go-green" era and investing in items to reduce green house gases. Therefore, it is necessary for the Fed to raise the interest rates, increasing investment and consumption, to further decrease our national debt and slowly but surely stabilize our economy.1) Seckinger

  40. Pumping more and more money into the economy is both dangerous and ineffective. The multi-billion dollar stimulus package currently in place (which I support) has to satisfy the most glaring needs of our economy. While stimulus money has helped slow the rapid decent of our stock market as well as the job market, it will not be enough to turn our economy around and return it to its once prosperous state. Yet implementing another stimulus package would cause more economic stress for the future and all that money would get backlogged in years of political red-tape. The main way to improve our markets is with an entire infrastructure over-hall. The manner in which our markets and largest corporations are operated must change to a way that better suits this new economic era while being much more stable. The amount of government spending and attempts at cost cutting (such as tax cuts) will soon reach such a level that they will flat line and the economy will become stagnate. Adding more money to this system will only speed up this inevitable fate. Assuring that the current stimulus package is used correctly and applied to the hardest hit areas of our economy is the only way to reverse the current trends.Kyle Winter

  41. The current stimulus bill was designed to promote a swift recovery from our current economic recession. The first and most fundamental question to ask is: is it working? Right now, it's far too early to tell. As of 10/30/2009, the vast majority of awards created by the Recovery Act are less than 50% complete or have not even been started (1). However, while we are still in a recession, it seems the economy is beginning to come back up. The housing industry is seeing increasing activity, household spending is going up, and businesses are cutting back on layoffs and spending cuts (2).If the economy can recover without the help of almost $800bn in stimulus, has government spending been wasted and the deficit needlessly increased? I don't think so. The money from the stimulus package, by providing funding to things like education, could stimulate the economy in the long run, possibly allowing the government an opportunity to reduce the deficit without massive cuts or prohibitive tax increases (we Americans seem to want to have our cake and eat it too – we love gov't entitlements but hate taxes). The U.S. government has the capacity to handle large amounts of debt in the short-term – the fact that we still have AAA-rated Treasury bonds (3) after years of debt is a testament to this – and if government spending now can get the economy on the move in the long run, after we've come out of the recession, we may have a better opportunity to reduce debt. That is, of course, if we can get the money where it needs to be.(1) as of 12/04/09(2)

  42. I feel like the only way that the government is ever going to get out of the debt (12 trillion dollars) is if we fix the economy now. One way to do this is to have a second stimulus plan. A sudden crises is unlikely as shown by other countries with worst debts then ours have soldiered on (1). We also have an advantage over those countries because we have stable politics, transparent laws and economic dominance give America unequaled credibility with lenders (1). If we see example of other countries adding to debt to help get out of economic problems I feel like we can safely say we can as well. If inflation becomes a problem the central bank can take it out (2).After helping our current economy out we will need to get rid of the debt that we have accumulated. There are a few ways we could do the including rising the age that people get Medicare and Social security (1). We will also be getting more money off of taxes when the economy gets better because more people will be making money and more will be making more money. With the government making more money from taxes we can pay out debt off. Merlino

  43. I think the United States needs to implement an additional stimulus plan to prevent our economy from failing even more. An additional stimulus package would put more money into the economy. According to Delong, we could cushion the impact of another big downward shock by "a lot more defecit spending" and "recapitalizing the banks again." These options could create more jobs because everyone is spending more money potentially preventing the US to enter into another Great Depression.-Janna Lee

  44. Brandon LawlorI believe that the US government needs to decrease the stimulus package in order to bring us out of the recession. The reported GDP growth of 3.8% was recently revised down to a less impressive 2.8%. While it may not seem like a big deal, this extra 1% is a huge difference. It is absurd to think that the government could be paying over $700 billion on interest alone by 2019. As the stimulus has not been proven to be effective, increasing the stimulus package is basically gambling away tax payers’ money. This is not responsible and may put our economy in a deeper hole than it is already in. We need to be sure that the stimulus will be effective before we fork over hundreds of billions of dollars. I think that the quote by William H. Gross from the NY Times article is very appropriate for this situation: “What a good country or a good squirrel should be doing is stashing away nuts for the winter. The United States is not only not saving nuts, it’s eating the ones left over from the last winter.”

  45. In our natural world, there is almost always something higher that is taking care of every person, things, or situation. For example, a baby bird would not survive if it did not have its parents to protect it, feed it, and teach it how to fly. However, if the parents never left the baby bird, it would never learn to fend for itself. I feel this is the situation America is currently in. We are over dependant on our “Mother Bird” or the Fed to support and protect us when our economy is in turmoil. An article in The Economist reads “Americans are stuck with a budgetary conundrum: they seem to be opting for more government, at least in health care, yet they do not seem prepared to pay for it.” (1) Again, this could be compared to a teenager who wants independence, but is not ready to accept or be prepared for the consequences of their actions – thus relying on their parents for help. Currently, the Fed is doing all that it can (without going farther and farther into debt) to help stimulate our economy, but nothing is truly going to change if we the people are not prepared to firmly grasp and take hold of every opportunity provided. We can no longer be solely dependant on our government to take care of our financial circumstances but work together with the natural flow of life and fix this situation ourselves. (1) Sjogren

  46. There are many different views on whether the country needs more stimulus or less and even though Krugman and DeLong make good arguments on why we should more, I believe we should have less. Our country is already in $12 trillion national debt and that number is only growing; we need to do something now to stop it. As the dealing with America’s fiscal hole article said, “America’s deficit problem is in essence a spending problem, so spending must bear the brunt of adjustment” (1). Further in the article they mention how “raising the retirement age for Social Security and Medicare would save money while encouraging Americans to work longer, thereby expanding economic potential. Medicaid could be converted to block grants, compelling states to assume more of the burden of cost control. Other spending should also be vigorously squeezed, to stop federal funds being wasted on highways of dubious value or trade-distorting farm subsidies” (1). I believe that these plans can actually work and help our country greatly, taking small steps to get us out of debt is the way to go. Adding to the stimulus I think just will not work. “With about half of the February stimulus spending spoken for, the measure has created about 640,000 jobs, fewer than the number of jobs lost in January alone” (2) If the February stimulus has not created more jobs then were lost then why would adding to the stimulus fix the problem? It wouldn’t. What I believe we need to do is slowly cut down on the stimulus and cut down on other areas as well as it said in the dealing with America’s fiscal hole article that I mentioned earlier. Honestly I believe this will be the only ways America will get out of the growing $12 trillion debt we are in. (1) Matesic

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