Entreprenuership

According to the latest economic data the economic growth has weakened, unemployment is rising, credit crunch and sub primes hitting the liquidity in the market, blood bath on the Wall Street. Seeing all these, government is feared of a downturn or probably start of a recession in the economy. In December 2007 President Bush and Henry Paulson (the Treasury Secretary) unveiled a package of tax rebates to try to boost the economy. The fiscal stimulus package is estimated worth `more than $150 billion in total. Individuals are expected to receive payment cheques from June- July. These cash outlays are expected to boost private consumption and accelerate overall demand levels for the economy. By seeing the size of the US economy this will be a small stimulus but it can have a multiplier effect. The immediate spends will increase the demand resulting into higher employment by the businesses. Higher employment will again stimulate higher private consumption, which in turn will induce more hiring. And this process continues. So the final aggregate demand will be many times bigger than the stimulus.

The idea is that a quick infusion of spending would get the economy back up to speed. The effects of the stimulus can be seen differently, based on what goods will be consumed most. Like in the last fiscal stimulus most of the spending was on clothes, healthcare and shoes. Clothes and shoes don’t jump start the economy much, the reason being they are mostly imported. As they were made abroad it will not help creating new jobs at domestic levels. Where as spending on the healthcare was mostly domestic.