2nd FRBSF Letter
23 Sep. 2012
This article was a research document about what fiscal policy has done for us in the past and what we speculate it will do for us in the future. The researchers studied and distinguished the past trends in our country since the great depression in order to develop a model to predict what will happen in the near future. Their study found that with relation to past events of the same nature our government overreacted during the financial crisis in recent years. The amount of money that the government injected into the economy was much to large and therefore it is going to take us much longer to balance our federal budget. Thus coming to their conclusion that fiscal policy in the future will be more of a headwind than a tailwind for our economy.
I completely agree with what was found here because I can tie it into my own personal life. My personal thought is although there are many more variables involved with the governments spending, their budget is going to act much like an individual person’s. For example, in the article the charts show that the government spent more money than they needed to. This is simple to me. As an individual if you spend more money than you need to and overexert your resources the same thing will happen. You will dig yourself a deeper hole and therefore it will take you longer to get out of that hole. The only real problem that I see is that unfortunately the people of today are not the ones who are going to bear the entire burden of the poor decisions made in the past few years. Our children and our grandchildren will not get to make up the deficit!