Economist Deepak Lai says the U.S. financial crisis is not solved and contains the seeds of a more serious future crisis. For India and China, with no structural deficit, a temporary budget deficit above that resulting from automatic fiscal policy makes sense. But it doesn’t make sense for the United States with its large structural deficit.
Economist Laura Tyson says there is a strong argument for more fiscal stimulus combined with a multi-year deficit reduction plan.
a. How has the business cycle influenced the U.S. federal budget in the 2008—2009 recession?
b. With which news clip opinion do you agree and why?
c. Why might Laura Tyson favor a multi-year deficit reduction plan and would that address the concerns of Deepak Lai?
d. Why might Laura Tyson and Stephen Harper agree about the role of fiscal policy?