The Economic Stimulus Package

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					      The Economic Stimulus

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
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-
   – 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
• 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
• Housing Sales, GDP, GNP, Inflation (CPI),
  Interest Rates
• Tax Information from IRS
What Kind of Models are
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
• 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
Addressing Needs in a DSS
• Eliminate/reduce unbiased results
• Information Sharing within decision makers
• Allow access to data and visual aids for decision
• Have ability to drill-down for additional
• 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?

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