According to an estimate by the Congressional Budget Office (CBO), only about 20% of the spending called for by the legislation will take place in 2009, rising to about two-thirds through the middle of 2010. It was passed over a year after the recession began. Measure illustrates an important difficulty of using fiscal policy in an effort to stabilize economic activity. The president said that the measure would “ignite spending by businesses and consumers … and make the investment necessary for lasting growth and economic prosperity.” Barack Obama, Weekly Address of the President to the Nation, February 14, 2009, available at. The other two-thirds is for a variety of government spending Qualifying college students are eligible for $2,500 tax credits for educational expenses. For example, each worker making less than $75,000 a year will receive $400 ($800 for a working couple earning up to $150,000) as a kind of rebate for payroll taxes. Roughly a third of the Recovery and Reinvestment Act is for a variety of tax cuts for individuals and firms.
Which of the following government policies are automatic stabilizers for the economy?.What is an automatic stabilizer in economics?.How do automatic stabilizers change the government deficit and taxes during an expansion?.What happens when the government increases transfer payments?.Case in Point: Post–World War II Experiences with Fiscal Policy in the United States.27.2 The Use of Fiscal Policy to Stabilize the Economy.Chapter 27 Government and Fiscal Policy.
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