The Economic Stimulus Package

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The Economic Stimulus Package

• Group B Bruce Cheng, Michael Guinn, Philip
  Musterman, Michelle Quach, Brian Swink

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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

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Economic Trends
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Who are the decision makers?

• U.S. Congress
• House of Representatives
• Senate
• U.S. President
• Right to veto
• Federal Reserve
• Controls the interest rate

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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 (300-600/person)
• 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

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Data Information Necessary for Model

• 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 successful
• Housing Sales, GDP, GNP, Inflation (CPI),
  Interest Rates
• Tax Information from IRS

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What Kind of Models are Necessary?

• Macroeconomic Models
• Deficit Spending Model
• Money Generation Model
• Federal Budgeting Model

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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
• Individuals well being (i.e. income)

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Money Generation Model

• Show how much money is being spent based on tax
  refund
• Based on percentage of state population affected
• Possible generation of sales
• Sale tax on purchases
• Businesses

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Federal Budgeting Model

• Shows the effect of refunds on the budget
• How to reallocate funds?
• Explain how refund will generate more tax revenue

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Addressing Needs in a DSS

• Eliminate/reduce unbiased results
• Information Sharing within decision makers
• Allow access to data and visual aids for decision
  makers
• Have ability to drill-down for additional
  information
• Compare options from model results

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Problems with Data Analyses

• Any budgeting model is based on projections
• Cant 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 govt. agencies
  did not account for anything accurately
• figures should be suspect

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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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Questions?