Gives detail Stimulus package granted by Obama regime in 2009 and its outcome

1. The Obama Spending Plan
The Stimulus Myth
By,
Avinash Kumar Mahto
Roll No. 1502045
PGDIM 22

2. Effects of Recession
• The S&P 500 lost more than half its value between
December 2007 and March 2009
• U.S. economy lost nearly 8.8 million jobs between January
2008 and February 2010
• Drastic fall in disposable Income affecting Consumer
Spending

3. Effects of Recession
• Mounting House debt per capita
• Deleveraging Since 2008
• Housing Bubble Burst and Price fall
• Production and thereby jobs directly or indirectly depend on Consumer Spending
• Consumer Spending experienced the worst hit

4. Obama’s Answer to Recession
• Officially called the American Recovery and Reinvestment Act
• $800 billion stimulus package was announced
• The largest economic recovery program in history
• Characteristics of the Package:
• Tax Cuts
• Transfer payments
Arguments against Tax Cuts:
• Increased spending better than reduced taxes
• As per Keynesian Theory, Government purchase multiplier (1.57) is more than tax multiplier (0.99)
Arguments favoring Tax Cuts:
• Govt. spending takes time to show its effect and Tax Cuts can occur instantly
• Govt. Spending on infrastructure many not be effective because of distorted goal
Final Decision:
• With minor modification, Bill was passed on Feb 17, 2009

5. Not so favorable Outcomes
• Expectation:
Economists predicted 3.3 million (net) new job by 2010
• Reality:
3.5 million (net) jobs lost since then, Unemployment rate above 10%
• Keynesian theory says Govt. spending adds money to the economy
• But it repeatedly failed. But Why?
Where does the money come from?
• Must be taxed or borrowed from other economy
• transfers jobs and income from one part of the economy to another
• Need to improved Productivity rate of the economic activities
• Long term process
• Resources transferred from more productive private sector to less productive government
Wait for the result!

6. Thank You