Research Project. Research and report on one of the following issues. Your repor

Question

Research Project. Research and report on one of the following issues. Your report should reveal a grasp of research findings and current areas of debate in your chosen topic. In 1993, Bill Clinton faced a large federal budget deficit and high unemployment resulting from a slow recovery from the recession of 1990-91. He called for spending cuts and substantial tax increases to reduce the deficit. The Federal Reserve chairman (Alan Greenspan) signaled his support of the President’s plan. Supply-side economists and monetarists were deeply concerned about the plan. What specific problems might a monetarist or a supply-sider worry about? How successful was the plan (and how do you define “success”)? What lessons should our current President draw from the results of the Clinton plan and its implementation?

Explanation / Answer

In order to recover from the Recession, there should be implementation of expansionary monetary and fiscal policies. As the country is recovering from the recession, high government spending in the infrastructure and opening up new employmnet opportunities and low taxes would act as a boost to the economy and stimulates its growth.

Supply side economists and monetarists were deeply worried as the spending cuts and high taxes would be demotivating for the manufacturer. They will cut down the supply of the products in the market as hiring of new employees and investing in new businesses is not profitable for them. Thus the supply gets affected and the flow of money in the market would also be low.

The plan was successful as it reduces the budget deficit of the US government as their revenues became more than the spendings.High taxes and low spendings increases the government revenue and lowers the expenditure. But it was not good from the point of view of the public.

Lessons for our President : If the country is recovering from the recession, government support should be given in the form of high spending and low taxes,so as to boost the economic growth.

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