Comments on: Fiscal Stimulus package passes in Congress – here comes $170 billion, America!

By: Welker’s Wikinomics Blog - for students and teachers of AP and IB Economics » Is being wise with your money bad for the economy?

Mon, 18 Feb 2008 13:34:45 +0000

[...] Fiscal Stimulus package passes in Congress – here comes $170 billion, America! [...]

Like or Dislike: 0 0

By: Chris Seah

Chris Seah — Thu, 14 Feb 2008 13:21:57 +0000

I am no expert but here is my take on this:

The economic stimulus plan is weak and ineffective. Given the worsening recession, what incentives do households have to spend this money and inject it back into the economy? A $600 check is no large amount and households would likely save it given the tumultuous times and an impending very rainy day. This seems to be simply pouring much-needed money out of the economy.

Like or Dislike: 0 0

By: Caleb Liao

Caleb Liao — Thu, 14 Feb 2008 11:13:57 +0000

It seems that this will help the economy, as long as the money stays within the states. These days with mass outsourcing, it would easily leak out. the country should watch out for this.

Like or Dislike: 0 0

By: Jason Welker

Jason Welker — Wed, 13 Feb 2008 21:56:45 +0000

MR, how will saving or paying of debt help push the economy back towards expansion? Doesn't the economy need more consumption? I don't get it…

Like or Dislike: 0 0

By: M R Johnson

M R Johnson — Wed, 13 Feb 2008 20:53:14 +0000

The only way I think this package will be effective is if everyone uses their rebates to either pay off some interest-heavy bills (such as credit card debt), or if everyone saves it. The problem seems to be this; will everyone have the discipline to use their rebates in those two ways?

Like or Dislike: 0 0

By: Mond

Mond — Wed, 13 Feb 2008 20:45:15 +0000

I agree with Trevor, if I was given the money I would save it. Because during a recession, it is a smart strategy to save up and spend money on the nondurable consumer goods such as food that are essential for daily living. It is highly unlikely that people will use and spent this money so that it will increase the GDP of the country.

Like or Dislike: 0 0

By: Trevor Sun

Trevor Sun — Wed, 13 Feb 2008 20:30:44 +0000

Well if i was given that much money id just save it and not go out and buy things. Maybe Drew is right and its just a last ditch attempt to gain some favor. Or the government might want them to use that money to go and buy things to help increase GDP but i dont think its likely.

Like or Dislike: 0 0

By: Jo Lo

Jo Lo — Wed, 13 Feb 2008 20:13:57 +0000

I think part of the reason for wanting to do this package is because Bush wants to try to save face before he leaves office early next year. He wants the American people to think he and the government are doing something to try to resolve this crisis. Nobody will know before the people actually get the money whether or not the stimulus plan worked. I think this plan will actually work better than many people think. With the declining dollar more people will decide use the money to buy what they can rather than risk losing buying power in the future.

Like or Dislike: 0 0

By: Drew Venkatraman

Drew Venkatraman — Wed, 13 Feb 2008 19:23:52 +0000

I think this stimulus is just one last ploy to give the people of America a sense that the government is trying to help them. Although the help is somewhat minimal, nothing significant to help with education or what not but i believe that the certain item will help prevent the inevitable recession ( at least in the short term)

Like or Dislike: 0 0

By: Christina Hu

Christina Hu — Tue, 12 Feb 2008 18:12:35 +0000

Why couldn't the government, like so many others have stated, just restrict what uses the rebates can be put to? Or, rather, send gift baskets of domestic products to households in place of the rebates? That way, they'd be directly stimulating aggregate demand, and ensuring that the money is not going into savings accounts or being used to purchase imported products.

However, no matter what the government does, "it should not be forgotten that every period of expansion in every modern market economy in the world has ultimately reached a peak, and then led to a contraction" (Mr. Welker) so the occasional recession is inevitable.

Like or Dislike: 0 0

By: Jack Lo

Jack Lo — Tue, 12 Feb 2008 14:59:17 +0000

I'm pretty sure that there will be some 'leakages'. Rational consumers will always try to maximize utility, and that usually means buying cheap Chinese goods. I highly doubt that consumers will take the time to check where every product on the shelf is produced. It's also very likely that Americans will spend this tax rebate on paying back debts or putting it into savings (if a recession is upon the nation, they will be more inclined to save the money to help them ride through the hard times).

Although there is little potential for this stimulus package to actually help economic growth, I think this was more of a political move to attract support from the general public.

Like or Dislike: 0 0

By: MichaelChow

MichaelChow — Tue, 12 Feb 2008 14:13:02 +0000

This stimulus plan, will hopefully add to the spending of consumers therefore increasing GDP of a nation. I think Kevin Chiu has a very good point on how, "if America is already in a recession, aren’t.. consumers more inclined to not spend the tax rebates?" For this to be effective I believe there needs to be an increase in quantity of cheaper goods.

Like or Dislike: 0 0

By: Alex Goldman

Alex Goldman — Tue, 12 Feb 2008 13:03:39 +0000

It seems that this stimulus plan will provide a small, but temporal growth in GDP. If the plan works, then consumer spending will boost GDP, which leads to economic growth. The government will be happy, as economic growth has many benefits. However, if the money goes into buying exported goods, paying off credit card debt, and into savings, the GDP will not grow and the government will be out 170 billion dollars. It seems this plan aims to garner support with voters, rather than provide long term economic development.

Like or Dislike: 0 0

By: Sam Young

Sam Young — Tue, 12 Feb 2008 09:10:13 +0000

I don't see how the stimulus can work.

This stimulus plan is the government saying "we are in a recession" so the rational thing for people to do would be to save the money for the hardships they will face during the recession and economics relies on "fact" that people act rationally.

However, if people were to spend the money anyway, contrary to rationality, as it has been said, given the amount and availibility of imported products, that money would most likely find its way out of the US economy very quickly.

Its a good try, but I have low hopes for it.

Like or Dislike: 0 0

By: kevinchiu

kevinchiu — Mon, 11 Feb 2008 22:08:04 +0000

Typo: ..that consumers can use* (not produce)

Like or Dislike: 0 0