This document discusses monetary policy, fiscal policy, and proposals to address unemployment in the United States. It analyzes the impact of the US housing bubble and the Iraq war on the economy, and argues that investing in green jobs and infrastructure could help stimulate growth and reduce unemployment over multiple years. The document also considers alternatives to traditional fiscal and monetary approaches such as eliminating the income tax in favor of a national sales tax.

1. Macroeconomics Panel Discussion Paper
Monetary & Fiscal Policy
Cody Box (2012)

2. Monetary Policy:
Monetary Policy is an essential factor in the United States economy. Monetary Policy is
simply a central bank’s changing of the money supply to influence interest rates and assist the
economy in achieving price stability, full employment, and economic growth. Another definition
that helps simplify Monetary Policy is that Monetary policy is the process by which
the monetary authority of a country controls the supply of money, often targeting a rate
of interest for the purpose of promoting economic growth and stability. (“Monetary Policy”) The
definition states it simply: Monetary Policy controls our government in the sense that our
government runs on money. The central banks in the United States have a goal to have our
economy in the best shape it can be in. Since the market has been on a down slope and we are in
the most debt we have ever been in, the government is implementing many plans to get our
economy out of this slump and recover from financial debt.
The United States housing bubble is an economic bubble that affects a large
portion of the United States housing market. Housing prices peaked in early 2006, and have yet
to recover. In 2008 alone, the United States government counted for over $900 billion to special
loans and rescues related to the US housing bubble, with over half going to government agencies
such as: Fannie Mae, Freddie Mac, and the Federal Housing Administration. The United States
government has yet to recover from bailing out banks and corporations. Home owners bought
their homes when the market was booming; therefore they could buy their houses and sell them
for more. Due to the housing bubble, home owners are forced to either get foreclosed or sell their
house and overall lose money from the time they bought the house to when they sale it. (“”)

3. With that said, I believe this event hurt the United States economic growth as not all the
money they thought was going recovered. It also hurt domestic companies profit as consumers
could not afford a loan to buy homes or even purchases homes with the high interest rates. With
those two negatives, I also believe that it hurt the United States citizen’s personal income due to
consumers losing money on their purchase of their homes. Overall, when you have three key
aspects sitting in the red, this event was an economic destruction for the United States economy.
Fiscal Policy:
Fiscal Policy is very vital in our economy as it deals with our budget, such as our
borrowing and taxation. An official definition says that fiscal policy deals with changes in
government spending and tax collections designed to achieve a full-employment and
noninflationary domestic output. Fiscal Policy’s vision is to have a flawless economy as they
strive to help get our economy at full employment while not having to increase inflation. This is
the idea economy.
When the American military went to war with the Iraqis on March 19, 2003, the economy
was uncertain as to what would be the outcome. President Bush’s economic advisor stated to the
American people that the war would not cost as much as people thought. She went on to say this:
“The successful prosecution of the war would be good for the economy.” WRONG! In 2005
congress estimated the cost of the war being $357 billion for military operations, reconstruction,
embassy costs, enhanced security at United States bases and foreign aid programs in Iraq and
Afghanistan. (“Bilms, Stiglitz”) As of today the total cost of war in Iraq adds up to around $789
billion and is climbing. (“Cost of War”) The war in Iraq has hurt our economy by being a
colossal contributor to our national debt. I firmly believe the war in Iraq was necessary, however

4. with the billions of dollars we have poured into the war, we could have done some things
differently that would have made a difference in America. For instance, with just the 2007 war
budget of $138 billion we could have instead provided a low level of medical insurance for all 45
million Americans that currently have no insurance. Also, we could have added 30,000
elementary and secondary school teachers and built over 400 new schools. This would have
increased employment rates greatly. The war in Iraq did some damage to our economy. I believe
it is the length of the war more than the initial budget cost for it. (“Pollin”)
The United States economic growth was hurt by the extreme costly war in Iraq. The war
pulled out billions of dollars from our government that we will not get back. On the other hand, I
believe the war in Iraq helped domestic companies profit due to the amount of domestic supplies
needed to fight a war. This was the only positive thing that the war had on our economy. The war
definitely hurt the United States citizens’ personal incomes as there were budget cuts with
companies and due to the debt deficit, jobs were not created and the government was not able to
start programs such as cash for clunkers in order to try and bring our economy back up on its
feet.
Sustained Unemployment:
The Obama-Biden emergency plan that was talked about in the beginning months of
Obama’s first term as president is more of a “kick start” program to get the economy out of the
high unemployment rate. There is a key point in there that I believe would help sustain the
unemployment rate for a few years. Obama-Biden talked about “Manufacturing and Green Jobs”
which is a great idea that would boost the economy for several years as the world is slowly but

5. surely trying to go green. Barack Obama and Joe Biden’s plan was to go green and create 5
million jobs in America. The way they would successfully do this is to invest $150 billion over
10 years in order to advance the “future” generation of biofuels, advance the commercialization
of plug-in hybrids, promote commercial renewable energy, invest in low emission coal plants,
and also to begin a transition to a new digital electricity grid. In order to complete these goals
would be what every economist and anybody who cares about their future in America want, an
increase in jobs! We would increase our employees by building new factories to perfect the
innovation of biofuels and new fuel resources. Doing this would mean manufacturing new
vehicles which would lead to factories that build these biofuels vehicles and create more jobs. I
understand that there are only a select few gas stations in America that have the option of
biofuels, for example Shell, but with enough interest and an increase in biofuel would force
companies such as Exxon and Kum & Go to add the biofuel option to their gas pumps. This
would also create jobs to get this transformation kick started. (“Change.gov”)
The creation of a better smart grid ties into the biofuel subject as building better smart
grids would better accommodate the manufacturing of hybrid vehicles. This would create a mass
number of jobs. Everybody that owns a hybrid vehicle would plug their smart car into a socket
that would be tied to the smart grid. A smart grid could inform consumers when the use of
energy would be hot and the need for it would be high, which would actually mean that the
owners of the smart cars would be paying higher than gas prices by charging their car that certain
time frame. The smart grid operators could inform the owners via text message, or email of this
problem and that day they could rely on their gasoline option in their car. On the other hand the
operators could inform the owners when the price or need of energy is back down and that’s
when you plug in your vehicle and charge it fully. Who would be the operators of these smart

6. grids? Unemployed people. Who would make sure the systems are running correctly day in and
day out? Unemployed people. In my eyes this is a great plan to help the country turn green, and
increase employment as well as saving the consumers money. (“Lazar”)
Sustained Employment- Personal View
In my own opinion, I think that the government should do away with income tax and
switch to a national sales tax. The reason is that the people that do cash transactions and black
market deals such as gamblers, drug dealers, and etc. would pay taxes on what they earn with
every transaction. There are people out there making millions by selling illegal items under the
table and the IRS has no idea how much they bring in. However, if we switch to a national sales
tax, the IRS would be there to collect the tax on the under the table buyers and sellers. This
would also allow low income families to file for a rebate on their taxes.
Another way to pull our economy out of the “toilet” would be to either lower or do away
with corporate taxes because if the big corporations have more money they will invest thus
creating more jobs and help with the unemployment rate. If a corporation makes a large amount
of money, than they have to give a large portion to the government, which we already know the
government will throw it away or give it to the endless war in Iraq. Instead why not invest in
their company and put more money towards their products and help make their product better
than the same product in a foreign country. That would increase the profit the domestic
corporation would pull in instead of the foreign company getting the money. Another thing they
would invest in would be creating more jobs.
This last solution does not exactly coincide with the Obama-Biden plan to go green, but
would help our foreign trade with oil and would put money into American consumers. I believe

7. that the government should lower the environmental restrictions and drill for more oil. From a
personal stand point, I know that a farmer in Texas would not mind if the oil company has to
chop down a few trees to drill for oil because when they strike oil, the farmer will have enough
money to plant 10 times the amount of those few trees that were chopped down.
The oil companies drill for more oil meaning we would have a greater supply of oil in our
own country instead of relying on foreign oil and their prices. This would also take the worry off
of Americans by not always stressing on what if foreign companies cut us off or what if we go to
war with them? That would not be a huge concern if we could rely on our own oil supply more.
Another plus about drilling in America would be the money going into American land owners.
Not only would you make money off of leasing or selling your mineral rights, but if they strike
oil on your land than you would increase your money supply. What do people do when they have
money or feel rich? They spend it at the supermarkets and put that money back into our
economy.
Conclusion:
Congress and Obama’s economic advisors are stuck in a paradigm and need to take the
advice of Michael Welsh, “Get your head out of your ass and discover a way to fix the
economy”. There are several ways to get our economy flowing the way it once was, but the ways
to do it have not been done before therefore people are scared and worried that they will not
work. How do you know unless you try? We need to do three things: kick start our economy,
sustain it, and eventually keep it at full employment.

8. Sources
"Monetary Policy." Wikipedia. 2011. Web.
<http://en.wikipedia.org/wiki/Monetary_policy>.
"United States housing bubble." Wikipedia. Wikipedia, 14 May 2011.
Web. 16 May 2011.
<http://en.wikipedia.org/wiki/United_States_housing_bubble>.
"Cost of War in the United States." Cost of War. National Priorities
Project., n.d. Web. 8 May 2011. <http://costofwar.com/en/>.
Bilms, Stiglitz, Linda, Joesph. "The Economic Costs of the Iraq
War." Information Clearing House . N.p., n.d. Web. 8 May 2011.
<http://www.informationclearinghouse.info/article11495.htm>.
Pollin, Robert. "The Iraq War Is Killing Our Economy." uruknet. N.p., 05
Sep 2011. Web. 8 May 2011. <http://www.uruknet.de/?p=42140>.
"The Obama-Biden Plan." Change.gov. Change.gov, n.d. Web. 12 May
2011. <http://change.gov/agenda/economy_agenda/>.
Lazar, Jim. "Plug-In Hybrid Vehicles, Wind Power, and the Smart Grid
." raponline.org. raponline.org, n.d. Web. 12 May 2011.
<http://www.raponline.org/docs/RAP_Lazar_PHEV -
WindAndSmartGrid_2007_12_31.pdf>.

9. Extra:
The government put into action the “Cash for Clunkers” program on July 1, 2009. The
reason behind this program was to boost the economy’s auto sales and provide and easier way
for consumers to purchase more fuel efficient vehicles. This program was a $3 billion program.
The program was estimated to last until November 1, 2009 but the four month period was not
met as the initial $1 billion was not enough. The government gave the program an additional $2
billion. This was a successful program except for the fact that the majority of consumers traded
in their vehicles for foreign vehicles. This program was a success for foreign companies as the
Toyota Corporation accounted for the most sales coming in at 19.4%. It was efficient in getting
“gas guzzlers” off the road but hurt American auto manufactures. Japan also had a program
similar to this but they did it a little bit smarter as they banned American made vehicles from
their program. That forced the Japanese to only purchase Japanese made vehicles. Overall, all
this program did was help boost foreign companies instead of American companies and once
again putting more debt on the American economy. (“Car Allowance Rebate System”)
Where would we get biofuels? Next time you drive in the middle of Iowa take a look out
your right window and then you left window. Did you notice the corn fields? Bingo! That’s
where we get a portion of our biofuels from. Biofuels or biodiesels are biodegradable and are
non-toxic. France is the world’s largest leader in biodiesel.
" C a r A l l o w a n c e R e b a t e S y s t e m . " W i k i p e d i a . 2 0 1 1 . W e b .
< h t t p : / / e n . w i k i p e d i a . o r g / w i k i / C a r _ A l l o w a n c e _ R e b a t e _ S y s t e m > .
" W h a t i s B i o F u e l ? . " B i o d i e s e l . N . p . , n . d . W e b . 1 2 M a y 2 0 1 1 .
< h t t p : / / w w w . o d e c . c a / p r o j e c t s / 2 0 0 7 / a r d i 7 m 2 / w h a t _ a r e _ b i o fu e l s . h t m l > .
( " B i o d i e s e l " )