Obama's fiscal package

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Following our discussion in the Year 12 lesson today about Obama's fiscal stimulus, I saw this graphic in The Guardian which shows how $838bn will be distributed across the economy. $637bn will be in the form of a variety of spending projects and the remaining $182bn in tax cuts. According to The Guardian ... 'Obama's spending bill, which will be funded entirely by the taxpayer, aims to create or save millons of jobs by beginning work on thousands of New Deal-style projects to renew the country's crumbling infrastructure. It also provides aid for the unemployed, help for schoolchildren and students, and various energy measures.' The aim is to get the US out of recession as soon as possible. Billions of dollars will be spent on bridges, roads, waterworks and sewage disposal. Another big area of expenditure is education. The congressional budget office estimates the bill would create between 1.3m and 3.9m jobs by the end of 2009. US unemployment is 7.6%, about 11million people.

How will this spending 'be funded entirely by the taxpayer? Can you explain how increases in spending by the government and tax cuts will create jobs?

USA - heading for a Depression?

The sharp contraction of the US economy accelerated in the last three months of 2008, with official figures showing GDP shrinking at an annualised rate of 3.8%. With forecasters already predicting the worst US recession since World War II, how big a danger is there that the US economy will slip into a depression similar to the 1930s? The latest figures paint a gloomy picture of the US economy. Consumer spending, which makes up two-thirds of the economy, fell for the second quarter in a row, by 3.5%. This drop was led by a 22% drop in spending on durable goods like automobiles and washing machines. The decline in motor vehicle production was so great that it alone contributed 2% to the fall in GDP.

Link to BBC News

What is the difference between a recession and a depression?

When was th elast time the world economy suffrered a major depression?