Rule number one in economics is people choose. The second rule is more painful all choices involve costs. Now that the leaders in Washington seem poised to increase the speed of the slow recovery, Duffka asks the question--what is the cost and, of course, the benefits. According to Mark Zandi from Moody's Analytics, "The proposed temporary tax cuts and spending increases will provide a substantial boost to growth in 2011. Instead of another year expanding at no more than the U.S. economy’s potential growth rate — with job gains of 1.2 million and unemployment hovering near 10% — real GDP growth will accelerate to 4%, job gains will pick up to 2.8 million, and the unemployment rate will decline to around 8.5% by year’s end." Economists know that close to 100% of spending on unemployment (it would be extended 13 weeks) compensation is spent and that has a large stimulative effect. Economist Paul Krugman of Princeton University, feels that businesses already have plenty of excess capacity (they are not using their fixed space productively) so they will not expand much this year and he thinks GDP will only be increased by .7%. The tax plan also includes a temporary payroll tax reduction that will lower many firms marginal cost and average total cost possibly increasing output by firms adding variable inputs (labor) which can lower unemployment if not too many discouraged workers return to the labor force looking for work. By the way the cost is expected to be over $700,000,000,000 over the next two years. Economics rule number 6: The Consequences of Choices Lie in the Future. No worries--the national debt is still just a tad under $14,000,000,000,000.
Center for American Progress analysis.
What do you think of the costs and benefits of this proposal? Who might you or your family benefit? What are the costs for you or your family?
I think that this plan can work but we can't keep spending more money and falling into a deeper deficit which will hurt us more in the long-run. Ideally we want to cut the deficit, minimize unemployment and boost our economy but it's certainly difficult to do all three at one...
ReplyDeleteIt is definitely important to stimulate job growth and improve the growth of our economy overall. While the cost of doing so would be substantial, our country already has an uncontrollable debt, so why worry about a little extra. It is more important to create jobs and get the economy back on track.
ReplyDeleteThis plan is definitely beneficial in the short run. It will increase spending and reduce unemployment which should boost the economy very well. It's unfortunate that this will hurt us tremendously in the long run, seeing as half of our debt will be added on to the debt we already have. For me, it's fine. Lower taxes, lower unemployment, sign me up.
ReplyDeleteAs long as the benefit ends up outweighing the cost, go for it. Provided real GDP growth rate actually accelerates to 4%, job gains actually pick up to 2.8 million, and the unemployment rate actually declines to about 8.5% by the year's end, I don't see any reason to not go through with this proposal. I'm sure that this proposal would benefit a lot of people throughout the world provided it's successful, and even if it isn't completely successful, I still think it's a chance we should take. If economist Paul Krugman is right, however, we may be regretting our decision to follow through with the tax cuts and increased spending sometime next year.
ReplyDeleteThis seems to be a very good plan and will help people get jobs along with people having the money to spend in order to help the economy. However, the more money we spend now in the short run, the longer it is going to take to payoff in the long run and could be very non beneficial.
ReplyDeleteI agree with this plan because it looks like if we follow this plan then it will make our economy better. Since there is a a tax cut I think it will benefit my parents since they don't have to pay as much and can spend that money on other things.
ReplyDeleteI think this is a good idea because this helps separate the gap between the rich and the poor a little and will also stimulate the economy which will help people get back on their feet and not need unemployment checks anymore.
ReplyDeleteI think the government should cut spending on employment because then people might be more likely to go out and look for jobs if they know they don't have that to rely on for a long time. We are kind of the ones paying for those people to survive because they use our tax money for the unemployment payments. I think they should end tax cuts for the wealthier people because that would help close the deficit without hurting the middle class people. The benefits of the unemployment proposal though are that there might be less homeless people and people living in severe poverty because the government would help them pay their bills.
ReplyDeleteThey might as well use this proposal since our national debt is nowhere near getting paid off. This proposal will be best for the country mainly because the creation of jobs at the expense of adding a little portion of our debt is almost meaningless. Their may be more effects of this plan, but seems better in the long run.
ReplyDeleteI think it will benefit our families more than us in the future because by reducing our taxes government will receive less money but will keep spending so we might go into more debt which kinda sucks (i mean if we are planning on paying it back one day).
ReplyDeleteI think the plan benefits companies in the short run because it will bring more money into each firm. It will also lower the unemployment rate, which is huge for our economy and families. My mom might not benefit because of the lower costs the firm has, aka her school, so her wages mitt be cut. But seeing there is cower taxes, less families will have trouble paying them off.
ReplyDeleteWhile this plan will be beneficial in the short run in stimulating the economy and job growth, the long run deficit will be substantial and we will just have another crisis on our hands trying to find ways to pay off the debt, including raising taxes.
ReplyDeleteThe tax cuts wil only be successful if you assume people will instead spend the money to help businesses. However, many cautious Americans will save the money they're not spending. The tax cuts may or may not help alleviate unemployment, but they will give them more money to send. For my family and me, the tax cuts will allow the money my parents are saving to pay for college, rather than to spend it immediately.
ReplyDeleteI don't see how everyone can't benefit from these tax cuts because we have more money and now we can go spend that money with out the fear of nothing enough. This plan should theoretically work because the economists believe people will spend money when they have more of it, but I think since we are in these though economic times people will still be scared and just try to save money just in ace of unemployment. We don't really have any examples to go off of to help us make the economy better since the late 1930's.
ReplyDeleteI think that this plan is beneficial because it will increase jobs and lower taxes. But it will hurt us in the future because their will be more debt that will be added on to the big debt we already have. I think that for me and my family it would be beneficial because all of our money wont be going to taxes so we can afford better things.
ReplyDeleteThe explicit cost is the 594 billion dollars that have to be used to create jobs. The benefits would obviously be new jobs in the US. Families that earn more money will benefit more. A lower amount of payroll taxes is cut for families that do not earn a lot of income. The plan will reduce the unemployment rate (it would great if it went down to about 5%)
ReplyDeleteI agree with Krugman that firms right now are using their resources inefficiently. The jobs created by the program may do less than expected, doing little to speed up recovery. The cost of creating a program to noticeably speed up recovery may be more than we are able handle but at least slow progress is progress.
ReplyDeleteI think its a great idea. I for one and happy that the government has an actualy stable plan of attack that they are confident in. As far as costs and benefits go i think that it would be wasting our time to worry any morea bout the deficit because we've gone this far with our debt in thie trillions and I'm still eating every night. Maybe if we support this plan and keep improving it and help it work, one day we can get te economy in good enough shape to begin paying of this debt. As far. Benefits and costs for my family go, i think it would be good with tax cuts to increase spending and all but otherwise i don't know what other effect it owuld have on my lilttle family.
ReplyDeleteCompared the bush's tax cuts and the amount they cost and the jobs they created, this is a very good solution. But it will only end up that way if all of these projected stats become true. I think this will benefit everyone if it actually works and people are willing to accept it. Yes the costs will be large but I think it is worth it in this current economy. Yes we have a large debt but we pay most of it back every year so I don't think this will change much.
ReplyDeleteIn my opinion, this plan would work. We already have great debt that having a little more won't cause much harm right now. If we decrease the unemployment rate, there would be an increase in spending. The only thing wrong with this is that we will probably run into some problems in the long run.
ReplyDeleteI think this plan will help us in the short run because it will help people get more jobs and when people get more jobs then they will spend more money which will help our economy. Granted it will cost money yo do this but it will be worth it in the end. The only thing is that this will effect us in the long run but we are already in a lot of debt so it should not matter that we are in even more of a debt .
ReplyDeleteI think this plan, along with most other plans will work, as long as we stop spending unnecessary money. Most importantly, we need to create jobs for people so that they can pay whatever they owe. We are so far in debt that it will be nearly impossible to recover. Hopefully, by reduced spending, minimizing unemployment, and creating jobs, the economy will turn around.
ReplyDeleteFrom our point of view, the MC far exceeds the MB of the Bush tax cuts. The costs far out way the other cuts while the job creation can barely compare. The government is taking a really big hit to minimally help the population and the unemployment rate. While our national dept grows more and more, what is China going to do when the US just says we can't pay that, sorry?
ReplyDeleteI definitely think that this plan has the potential to be beneficial, however, it comes down to if those who received tax cuts will spend the money to help businesses. I'm not sure if people are willing to do that. In the short run, this plan is a great idea. The jobs it will create are extremely valuable. If only we weren't so much in debt already...
ReplyDeleteWith this plan, I believe that the economy will be stimulated quickly, but only for a short period of time. Over the long run, the debt will increase even more, but the government doesn't seem to be too concerned about that anyway. If the economy could be build up tremendously, we could see profits within the next decade.
ReplyDeleteI think the plan will benefit the people in the community, but are they willing to spend their saved money into businesses in the economy. Since money is tight for a ton of people they are going to save their money rather then spend it.
ReplyDeleteI think its a great idea, that might have potential to possibly simulate the economy. Though with this plan, I don't think the government thinking about the debt that we owe. I guess the marginal benefit of simulating the economy far exceeds the marginal cost of our hefty debt that we owe.
ReplyDeleteI think this is a great plan. By putting more money in the pockets of consumers, we will spend more to help stimulate the economy. Likewise, by cutting costs for firms to hire workers, they will be motivated to hire more workers. This will cause problems, as the debt is still huge, but it is necessary right now in order to help the economy.
ReplyDeleteI agree with the plan but the ui extension could be increased since it's the part of the plan thatchas e lowest cost per job. At the same time, people aren't willing to spend money they don't have to, so in order for the plan to be really effective, people need to be willing and able to spend more of their money.
ReplyDeleteWe'll never get the economy back unless we spend money (you gotta spend money to make money as they say). And unless the economy goes back to normal we'll never pay off our national debt. However if this plan doesn't work we could be even deeper in the hole because they are trying to speed up the process in the short run even though in the long run the problem would have fixed itself.
ReplyDeletei think that this plan could work because lower MC and lower ATC means economic profit which means more firms will enter which causes higher employment rates. however, in the long run, the firm will go back to equilibrium and people may loose their jobs. this could affect my family because my sister will be entering the job market soon, and if therr are more jobs available then hopefully she can get one.
ReplyDeleteI think that thaw plan will help us significantly in the short run because deficit spending will decrease along with peoples spending on unnecessary wants. I don't think thaw plan will help in th long run though because our debt will just raise after a couple years because citizens will lose interest in trying to help th economy and start worrying about themselves again. Hopefully jobs become stable and profits sky rocket within the next years and eventually stays like that.
ReplyDeleteI think it's a good plan, it's goal is trying to make progress by creating new jobs and stimulating the economy even faster. However the debt is still large, so we have to be careful to not overspend on unnecessary things.
ReplyDeleteI think this plan could be successful if carried out in the correct way. By cutting taxes, people who are having trouble with money currently won't all of a sudden start spending more for fear of the the future of their money going away. I know my family and parents should enjoy the tax cuts at first because they feel more secure, but it won't change our spending plans that much. In order to boost the economy, the tax cuts would have to be implanted for a longer period of time to help stabilize our spending habits and the economy.
ReplyDeleteI think that the plan is a good idea but I don't think we should keep on spending so much. Overall this will help us in the long run.
ReplyDeleteI don't think we should because more jobs will create lower wages and with blower wages not as many people are going to really be willing to or be sake to afford to spend much of that income so basically the government will be giving out mire jobs trying to reduce debt but will make more debt because the income won't be high enough in the short run to spend in elastic goods.
ReplyDeleteI think that spending this money would be a good idea to get us out of this recession because our debt is already out of control so adding more wont really do much and we would probably need to raise taxes in the future to reduce it. If we spend money now and get out of the recession, I think people will be more willing to have higher taxes later. And more people will have jobs and be able to pay taxes.
ReplyDeleteI agree with the plan because it will help in the short run and our national debt is already incredibly high so if it benefits the people and helps unemployment, but people need to be willing to spend more of their money.
ReplyDeleteI think that continuing the tax cuts is nice and having a more aggressive spending plan could lift us out of a recession. Politicians are focused on the immediate benefits and delayed costs, but this spending plan will have more immediate costs but hopefully it can quickly lift us out of a recession, paired with a nice tax cut for the middle class.
ReplyDeleteThis is a good idea in the short run, and will hopefully increase consumer confidence and create job growth. These benefits far exceed the costs if the economy is stimulated; however, if this is no more effective than tossing money in a garbage can then we'll be stuck in the mire we call the economy. Either way, this adds to the defecit, which unfortunately should come second to the economy.
ReplyDeleteIf this plan goes into actiion and people accept that it will cost a lot but will be worth it in the end, then it will be worth it. Our debt is so large already and with it increasing, it's doesn't seem to be that big of a change. Overall, it depends if these projected stats become a reality.
ReplyDeleteThis idea is a good idea in the short run because the tax costs will bring the gaps between the classes closer together and put more money in peoples pockets, which will stimulate the economy. In the long run this might make the debt we have even larger but it's already so large how would this make a difference. I think it's more important that the economy is stimulated and the unemployment rates a lowered.
ReplyDeleteI think that its good idea in the short run because it will create jobs and decrease the unemployment rate, but it will increase costs and a lot of people might not spend the money to help stimulate the economy and save it and tha would actually hurt us more in the long run, so depending on how we spend the money is how well do in the long run, so it is a gamble.
ReplyDeletei think that this plan is going to benefit many Americans who have been struggling since 2008. Although this stimulus plan will cost a lot of money which will further our debt, in the end it's better for people to have money to spend it on things so that the money can be circulated in the economy which may decrease our debt.
ReplyDeleteI think the tax cuts are a good thing because they will give people more money to spend and help boost the economy and I think right now improving the economy is more important than decreasing our national debt
ReplyDeleteThe plan would benefit society. The benefit of getting out of the recession exceeds the cost of of additional debt.
ReplyDeleteI think this plan is a bad idea. The explicit cost of $550-700+ billion adding to the deficit far exceeds the benefit of about 2,000,000 jobs. More than likely, this money could be better used on alternatives, there is little chance these jobs will contribute even $550 billion back to the economy, so much of this money will be wasted to increase the rate at which the economy rebounds. It is more important our deficit is eliminated, then other problems can be dealt with at that time.
ReplyDeleteI think this is a good idea because middle class will have more money to spend. And it will get our economy back on track, the cost will be the debt we accumulate and have been accumulating.
ReplyDeleteI thnk that this plan is a good idea. Obviously economists have thought this out and know what they are doing, and they've provided us with real numbers that these tax cuts will create. If it increases our GDP and increases the amount of jobs, why wouldn't it be a good idea? Even though they are spending 524 billion dollars, the GDP increase should over time cover that amount.
ReplyDeleteI think this is a good idea because people will increase spending which will result in the need for more workers to produce the increased amount of output. This rise in jobs will then enable people to spend still when taxes increase because they will have the income to consume with.
ReplyDeleteI think this is a good plan for the short run only though. I think we should use it because realistically our debt will never be paid off a 14 bill so I think it's a good idea. It would boost our economy and get us out of the recession which obviously would help society.
ReplyDeleteI think this isn't the smartest idea seeing how we'd be forcing the economy to create jobs that aren't needed. I feel that this would only create temporary relief and we could be looking at a possible larger recession in the next few years. Tax cuts wouldn't help as much because some people would be unaware of it and others would still save money regaurdless of how much more they have.
ReplyDeleteI like the tax cuts but I don't agree on spending our excess money on unemployment. The tax cuts will help my family by devoting less of our money to the government. I would like to sees the other government income be used to fix the energy crisis and things like infrastructure and agriculuture.
ReplyDeleteIt is a good idea because it will create a big boom in the economy and create many new jobs in a shorter amount of time. By allowing middle class to become wealthier more money will be put not the market
ReplyDeleteI believe that giving more Americans the ability to find jobs is the most important thing right now. In doing that, it will not only help families across America, but it will give consumers more money to put back into the economy, making up for any costs.
ReplyDeleteThe costs come in the rising deficit but in the short term,things will look up for Americans because rising employment and lower marginal costs for businesses result in new jobs and cheaper goods, benefitting the standard consumers and producers.
ReplyDeleteContinuing the tax cuts for the middle class sounds like a good idea. Trimming the federal budget will also have an immediate effect on the economy. Governments prefer immediate benefits and delayed costs, and although this plan incurs immediate costs, the marginal benefit is immediately greater
ReplyDeleteThe economy will recover of there is job growth and this plan seems to do just that in the way it'd stimulate the economy by creating more money available to be spent so it'll be more helpful to us in the future if the economy continues to grow and recover.
ReplyDeleteI agree with Pacelli. Just because people will have more money to spend doesn't mean that they will spend it. I think most Americans are still feeling the hardships of a recession, and therefore will be very hesitant to spend. Even so, unemployment is a huge problem, and reducing it is necessary.
ReplyDeleteI think that this is a very good idea which would benefit our nation. Although this will be costly, our national debt is already so low that although this would still increase it, its benefits are more significant than the costs.
ReplyDeleteThe combination of tax cuts and more jobs created will put more money in the pockets of consumers, but it's questionable whether they/we will use that extra money to aid businesses rather than save it for when times turn real bad/people lose their jobs. Personally, extra money my family will save from tax cuts we will save in order to help pay for my college education, which is not necessarily beneficial for the country's economic standings.
ReplyDeleteJob growth is continuing to rise, so this proposal of even more spending sounds like we are getting pretty greedy. Some people will choose the long run benefits of letting the economy work itself out, but the majority will most likely be in favor of the quickest solution. The first thing on most people's mind is a job, not reducing the multi-trillion dollar national deficit, so I think they'll support more tax cuts.
ReplyDeleteI still do not feel that I have anywhere near enough knowledge especially concerning the economics on the national level to answer this question. However until someone can explain to me what exactly is going to happen in us by remaining in our deficit. I fail to see why if we spend 5% of our debt it will harm us.
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