The goals of this assignment are to continue reading and thinking about fiscal policies, to begin analyzing macroeconomic impacts of policy, and to communicate what you’ve learned.
Step one is to think about important and current fiscal policy issues. Your focus should be on the short run (think: aggregate demand). What are the key current issues? Where are the discussions and debates in Washington? What are the President and members of Congress (both parties) advocating? How about others with some credible expertise (from the news media, academia, think tanks, advocacy groups, and the like)?
Here are some examples of policies ripe for your analysis. This list is only to prime your thinking; you are welcome to analyze and write on other currently relevant fiscal policies.
- budget sequestration
- changes in federal health policy
- increases in federal infrastructure spending
- changes in transfer payments (such as extending unemployment insurance)
- changes in tax policy (need to be specific here)
- balancing the federal budget in general
- Eurozone and Japanese fiscal policies (and lessons for the US)
- state and local fiscal choices
- changes in specific tax expenditures
Step two is analysis of the short-run macroeconomic impacts of policy issues. Pick one specific and clearly articulated policy idea for your analysis. How does this policy fit into the current macro context? What are the likely effects of this policy on the components of aggregate demand, and on equilibrium output? Specificity and detail are key in describing policies and their effects. For example, if the policy you are analyzing involves changes in government spending, what kind of spending, and in what dollar amount?
Write a brief essay (max 2 pages) describing the policy you will be analyzing, analyzing its macroeconomic impacts, and assessing its merit in today’s economy. You may choose to include graphs as part of your analysis, but this is not required. If you are basing some of your work on things you’ve read (perhaps someone’s policy ideas), include complete citations.