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| Fiscal policy involves government spending or taxation to stimulate or restrain the economy. These changes involve decisions made by the president, the Senate and Congress. Since different political parties are typically involved, debates on these issues are usually very politically charged. In addition, there is general agreement that fiscal policy involves long lags. By the time the legislators discuss and debate what form the policy should take, the problem may be over. Any enactment of the policy at this point could worsen the situation because of poor timing. In the first two Web sites that follow, you will see various aspects of the 2001 fiscal policy changes that took place during the first year of President George W. Bush's administration. The other articles discuss the effectiveness of fiscal policy as a tool of stabilization policy, plus the need for fiscal reform. Part I. The first Web site discusses the tax changes enacted by President Bush. Briefly discuss the highlights of the tax changes. Are these changes discretionary or nondiscretionary fiscal policy? How does Bush's policy differ from previous policies of other administrations? http://www.fairmark.com/news/egtrra/overview.htm Part II. After the terrorist attack on the World Trade Center and the Pentagon on September 11, 2001, Congress immediately suggested a fiscal stimulus package. Visit the following Web site, and then discuss some of the problems with using discretionary fiscal policy as a means of stimulating the economy. http://www.businessweek.com/bwdaily/dnflash/nov2001/nf2001112_0867.htm Part III. Is fiscal policy effective as a tool of stabilization policy? http://www.econ.berkeley.edu/~auerbach/effective.pdf Part IV. Clearly, the fiscal policy system needs to be reformed. In what areas, and how should reform take place |