The 2009 Stimulus Package: The Tax Cut Effect Argumentative Essays Examples
The global economy witnessed an unprecedented economic crisis in late 2008 and early 2009 since World War II. The crisis rippled across different countries, sectors and activities. The global economic community responded in different ways. Notably, stimulus plans emerged in major economies to boost waning economic activity. The U.S. has been, indeed, hit hard and was major source for global economic instability. Jobs lost and major businesses went bankrupt, U.S. government intervened in what was seen as a fallback to state control and dismissal of free market model. As a response to Great Recession, Obama Administration proposed an USD 787 billion stimulus plan (Teslik). The plan was initially aimed to stimulate economic activity by cutting taxes for businesses to create jobs and individuals to spend more. Initially, little impact was noticed in slow economic recovery and small employment growth rate. As Obama Administration's stimulus package was focused on job creation and increasing spending, one major option which was offered as part of overall plan was to reduce taxes for businesses and individuals (Baker and Hulse). Tax deductions were in fact detailed and aimed at as broad as possible base of businesses and individuals. Out of USD 787 billion in overall aid (Hossain, Cox, Mcgrath and Weitberg), USD 480, 533 million in tax cuts as follows (Grabell and Weaver):
Tax Relief for Individuals USD 246,869 million
Tax Incentives for Businesses USD 6,150 million
Business USD 3,540 million
Other Tax Relief USD 6,858 million
Infrastructure Financing Tools USD 19,350 million
Renewable Energy Tax Credits USD 19,968 million
Aid to State and Local Governments USD 95,136 million
Health Care USD 20,352 million
Aid to People Affected by the Economic Downturn USD 62,310 million
USD 480, 533 million
The U.S. economic recovery has been attributed to a broad range of factors including most notably Federal Reserve zero interest rate. Yet, contrary to criticism to U.S. stimulus plan – as compared to similar plans in different major economies – U.S. edition of economic recovery can best be described as aggressive. Tax cuts – in spite of being criticized for being too broad and ineffective, overall effect has been but positive. For current purposes, tax cut positive influence on U.S. economic recovery is explored.
Tax cuts are generally one economic policy which sovereign states adopt, particularly during economic slowdowns, in order to incentivize investors and stimulate growth. The situation has not different since economic crisis of late 2008 – early 2009. Tax cuts – as part of Obama Administration stimulus plan – have been introduced into different economic sectors as well as for individuals. As noted above, Obama's plan has targeted specific sectors and individuals, resulting in not only overall positive economic benefits but also in major economic turnarounds and diversifications, probably could not have been implemented in absence of a major economic crisis. Indeed, most of America's economic leaps can be identified in one major economic crisis or another. Tax cuts are one major factor which has not only helped influence U.S. economy positively but also achieve economic leaps.
Tax cuts applied constitute a considerable size in overall stimulus amount (Hossain, Cox, Mcgrath and Weitberg). This is a notable amount in a stimulus plan and has been in fact subject to a lot of criticism. The impact on U.S. economy has been, however, more positive than expected.
Based on deductions for businesses and individuals, U.S., U.S. economy has been able to channel investments from conventional sources of energy, such as fossil fuels, into renewable resources, such as solar energy and wind as well as biofuels; and from paper-based medical records into electronic ones (Grunwald). Because of tax cuts for businesses, U.S. enterprise ecosystem has witnessed major turnaround in economic activity as well as market segmentation. By reviewing enacted strategies, U.S. businesses could, for a long period, under overall economic pressures to shift strategies and expand in business in and out of U.S.
Probably in a more subtle way, as economic crisis set in more Americans opted for independent activities – social or business – to meet daily, medium- or long-range needs. As crisis abated, new business models – propelled by tax cuts which helped ease out pressures on individual expenses – started to emerge, notably sharing-economy-based models (Hecker). Thus, out of a deep economic came new models of personal business for individuals not conventionally in business world. This is, in fact, an economic turnaround no less significant, in long range, for U.S. economy. By incentivizing businesses and individuals directly, both businesses and individuals are led to more innovative means to change course of an ongoing economic crisis. If anything, any effective public policy aims, ultimately, to not only change an economic course went wrong but also, optimally, to leverage citizens' potential.
Still, stimulus plans are subject to criticism as of mixed results (Wolverson). Credited for short-range results – by consumer spending boosts, business incentives as well as job creation via tax cuts and public works projects – stimulus plans fail to meet longer-range promises of sustained economic growth. Further, tax cuts are historically associated with criticism based on economic privileges and benefits granted to upper segments of U.S. society. Tax facts are, in fact, viewed as of lesser effect let alone positive effect on economic growth in longer range. Yet, as noted, longer-range effects in vital economic sectors such as energy because of tax cuts are evident in exponential growth of sustainable energy projects and facilities in and out of U.S. By offering incentives for medical facilities to electronize medical records – and hence save indirect medical costs – and by broadening broadband connectivity – and hence enhance telecommunication infrastructure across different geographical areas – tax cuts do not only constitute a major factor in U.S. economic recovery but also enhance chain value of activities across U.S. economic sectors.
In balance, tax cuts are shown to be of mixed effect. Admittedly, not all tax cuts lead to bigger economic activities. Further, practice has shown tax change policies achieve longer-range economic goals by proposing economic boost rather than windfall support which are regarded as only short-range and unsustainable. Most significantly, a tax change structure and financing model are fundamental in effecting economic growth (Gale and Samwick). Still, given Obama's tax policies – whose focus has helped contain negative economic effects – end results, so far, are shown to be positive not only for incentivized sectors but also for economy overall. Initially, proposed cuts were viewed as waste of public funds, let alone being a remedy for an economy in crisis.
In conclusion, against a background of deep economic crisis followed by an unprecedented economic recession Obama Administration proposed a stimulus package in 2009 in order to help boost economic recovery. Fundamentally, Obama's stimulus plan aimed at creating jobs and encouraging consumption. By incentivizing businesses and individuals via tax cuts, economic recovery and growth could be achieved. Given following economic recovery and later growth, tax cuts are proven significant in not only lifting U.S. economy from a deep recession but also creating new opportunities in vital sectors, not least energy. By incentivizing businesses and individuals, U.S. stimulus plan has created opportunities in sectors long avoided either for economic or political costs. Overall, proposed tax cuts have proven of positive economic impact. True, refinements could further qualify tax cuts as a positive factor for economic recovery and growth. However, tax changes are not similar in economic impact. Therefore, further investigations need to be performed on impact of tax cuts for specific sectors particularly during economic crises. A conventional economic policy adopted differentially to boost economic growth, tax cuts remain an area of economic policy which experience different chances of success and failure for a broad range of complex reasons. In Obama's stimulus plan's case, tax cuts have played a significant role in effecting economic upturn by targeting specific tax-payer segments and economic sectors. There remains still to show how effective similar tax cut policies could impact positively on overall economic growth during periods of more economic activity.
Baker, Peter, and Carl Hulse. "Obama Plan Includes $300 Billion in Tax Cuts." The New York Times. The New York Times Company, 2009. Web. 4 Apr. 2015.
Gale, G. William, and Andrew A. Samwick. Economic Studies at Brookings. Effects of Income Tax Changes on Economic Growth. The Brookings Institution, 2014. PDF file.
Grabell, Michael, and Christopher Weaver. "The Stimulus Plan: The Tax Cuts." ProPublica. Pro Publica Inc., 2009. Web. 4 Apr. 2015.
Grunwald, Michael. "5 Years After Stimulus, Obama Says It Worked. " Time. Time, Inc., 2014. Web. 4 Apr. 2015.
Hecker, Richie. "Richie Hecker: Thanks to the Sharing Economy, Everyone Is an Entrepreneur." The Wall Street Journal. Dow Jones & Company, Inc., 2015. Web. 4 Apr. 2015.
Hossain, Farhana, Amanda Cox, John Mcgrath and Stephan Weitberg. "The Stimulus Plan: How to Spend &787 Billion." The New York Times. The New York Times Company, n.d. Web. 4 Apr. 2015.
Teslik, Hudson Lee. "The U.S. Economic Stimulus Plan." Council on Foreign Relations. Council on Foreign Relations, 2009. Web. 4 Apr. 2015.
Wolverson, Roya. "The Stimulus Report Card." Council on Foreign Relations. Council on Foreign Relations, 2010. Web. 4 Apr. 2015.