The Economic Stimulus Package 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- $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 foreclosureFederal Housing Administration –increase the size of tax payments for the working poor, increase food stamp funds, and restore unemployment benefit extensions

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

What Kind of Models are Necessary? 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 affected 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 revenue

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

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?

Questions?