Content Tagged: stimulus

Is Another Stimulus Package Needed?

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March 2, 2012

Will the government need to provide another stimulus package? According to an article by Pedro Nicolaci da Costa for Reuters, Federal Reserve Chairman Ben Bernanke alluded to a need for more federal money to help stimulate the economy. Although the economy shows slight signs of improving, Bernanke warned that this growth and the drop in unemployment seems odd. From the article:

 

“There’s still a bit of a contradiction between the improvement in the labor market and the speed of the overall recovery,” Bernanke said in a second day of testimony to Congress. “You’ve still got consumption spending growing relatively weakly.”

 

Bernanke told Congress that it must develop a long-term plan to help with the federal deficit America currently faces.  However, da Costa states that Bernanke also believes that a constricting of the fiscal agenda for 2013 could “derail the recovery.” Bernanke answered the claim that the American economy had been permanently damaged and would have to adjust interest rates accordingly. Bernanke stated that, “We do not see at this point that the very severe recession has permanently affected the growth potential of the U.S. economy.” He does believe, however, that unemployment rates have the potential to hurt the economy in the long-term. From the article: “Although we haven’t seen much sign of it yet, if that situation persists for much longer, then that will reduce the human capital that is part of our growth process going forward.”

Teachers can use this article to learn about the Federal Reserve and the individuals that comprise the organization. Prior to reading this article, students can visit the Federal Reserve website and learn about the Fed’s impact on the United States’ economy. Other helpful information would be to cover terms like inflation and deflation, found within the original article and commonly associated with economic policies. Teachers could also have a roundtable discussion with their students over the pros/cons of an economic stimulus that Bernanke hints at. Possible debate topics include: How much should the stimulus cost? What are some positives? Negatives? How will it be funded? What might a stimulus do for America’s economy short-term? Long-term? What will this do to the federal deficit?

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How Much Economic Stimulus Is Needed?

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September 7, 2010

In Paul Krugman’s latest New York Times op-ed column, he makes no secret of his feelings about the Republican party’s opposition to the Obama administration (“If [Obama] came out for motherhood, the G.O.P. would declare motherhood un-American”).  That said, Krugman does not view President Obama’s economic policies through rose-colored glasses, noting in no uncertain terms that “the administration’s optimistic forecast was wrong.”  The question Krugman puts forth asks which group of pessimists, those who thought the stimulus was too big or those who thought it was too small, correctly predicted the reasons behind our current economic strife.

Krugman has argued from the beginning that $800 billion fiscal stimulus was too small.  From the article:

As I pointed out in February 2009, the Congressional Budget Office was predicting a $2.9 trillion hole in the economy over the next two years; an $800 billion program, partly consisting of tax cuts that would have happened anyway, just wasn’t up to the task of filling that hole…

The actual lessons of 2009-2010, then, are that scare stories about stimulus are wrong, and that stimulus works when it is applied. But it wasn’t applied on a sufficient scale. And we need another round.

As President Obama gears up for a flurry of economic speeches leading up to the elections in November, teachers could use this article to frame one side of the stimulus debate.  Students should be encouraged to research both sides of this debate and develop their own opinions about government stimulus.  Ultimately, students should begin to discuss the appropriate balance between government spending to stimulate the economy and fiscal austerity aimed at reducing the national debt.

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