stock market was signaling that the economy needed or soon would need a tax cut to prevent a recession. If financial investors have a Keynesian perspective, equity markets will rally on the news that a tax cut package has passed. They will believe that it will create higher AD growth which in turn will lead to higher revenue and profit growth for corporations.4) In the first quarter of 2009, President Obama pushed his massive fiscal stimulus package of $862 (It was originally at $787 billion) through the Congress and later passed by the House and the Senate, whose centerpiece was spending most of this stimulus funds in repairing and building infrastructure in transportation, healthcare, science and technology, and education. Obama also urged to make a modest tax cut for middle-income families making a household income less than $250K per year. The push for this combined package of spending and partial tax cut was also criticized by several opponents in politics, academia, and businesses on the ground that the spending was too large under government financing to balance the growing budget deficit and debt that might threaten future economic stability of the country.
4) A) What possible macroeconomic arguments might President Obama use to defend his $862 billion fiscal stimulus package as a part of his economic recovery plans?
B) Why do you think the critics were so much concerned that this stimulus package might be bad economic policy, and not just for the US, but for the world economy? Does it sound to have a trickle down adverse effect in the current or future financial stability in the US and the World economy, say later in 2011? Do you think this issue is also related to the current political rhetoric between the GOP and Democrats on raising the debt ceiling over $16 trillion? (New debt ceiling proposed by Pres. Obama on Jan 12, 2012: -ceiling/)?The biggest concern with spending money you don't have is the long-run. Who's going to pay for it? Generally, running a budget deficit means that it will have to be paid