Economic Stimulus 101

Posted March 12, 2009
 
Economic Stimulus 101

Can we spend our way out of a bad economy? Explore the costs, benefits and impacts.
$787

billion

Total value of the American Recovery and Reinvestment Act signed into law by President Obama on Feb. 17, 2009.
 

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Basic Overview
Professors describe the background of the economic crisis and stimulus plan:

“The basic problem we’re facing now is insufficient spending.”
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“[The crisis] started in financial markets… and we are now in a nervous part of the recession.”
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“[The bill is] a fiscal stimulus package and it’s absolutely necessary.”
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“It’s not just a financial crisis, it’s a much deeper crisis of our economic system.”
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“None of us truly understand what happened and how to fix it.”
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Where is all this money coming from?

“The money comes from borrowing.”
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“We will run a short-term deficit in order to finance this program.”
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“You need to make a distinction between the gross expenditure and the net effect on government budgets.”
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And where is the money going to? What’s in the bill?

A breakdown of tax cuts and government spending categories in the stimulus plan.
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“It breaks up into three broad categories: tax cuts, aid, and direct spending by government.”
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“There’s just little bits of money going all over the place; a lot of this money isn’t being spent any time this year.”
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What is the effect on state and local budgets and spending?

State and local governments must operate under a balanced budget, which leads to many cuts in a bad economy.
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“I was a little disappointed to see that there’s been a pull-back from the aid to state and local governments.”
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Unemployment
Will the stimulus plan help reverse the trend in rising unemployment? Does it matter where we put people to work?

“At least to the extent that it will slow the bleeding. We’re applying a tourniquet right now.”
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“If there is spending, then firms will hire workers because they’ll see a demand.”
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“The real net benefit comes if we actually make [workers] produce something that is useful.”
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Which industries have been hit hardest by job losses? Which industries show the most promise?

“A lot of jobs have vanished in the financial services industry.”
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“There is vibrancy, there is some hope, for new products and new technologies.”
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“If I were young, I would pick industries that are young now and will be bigger in the future.”
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Produced by Jackie Hai, Richard Caesar and Frank Godinho, AmherstWire.com.