The 2009 Obama stimulus package had a positive effect on our economy, although there is no telling exactly how much. Obama's economists argued that Congress needed to enact it in order to prevent the unemployment rate from soaring above 8%. Of course, after enactment the rate actually rose above 10%, at its peak. We just do not know what the rate would have been in the absence of stimulus. At this point, the stimulus package has run its course and we are left with its $800 billion cost added to our national debt. And one can argue that an economic recovery already was in the cards in 2009, stimulus package or not, since the recession officially ended in June, 2009, just four months after passage of the stimlus package and well before much of the stimulus money had been spent. While we can presume that the stimulus muted our economic decline, we must now ask the follow-up question: How much better off are we today, compared to the counterfactual? Nobody knows the answer.
Regarding Europe, austerity (raising taxes while cutting public spending) seems to be contributing to an economic slowdown. But, it is hard to separate out the effect of austerity alone, since it has been accompanied by a dimunition and, possibly, reversal of capital flows as countries are unable to borrow as much from outside their borders as previously. Loan money is no longer flowing into Ireland and Spain to finance their real estate bubbles. Likewise, capital flows into Greece are diminishing as the government curtails its spending and indivduals and businesses become motivated to send their capital beyond its borders. So, Greece's decline is unavoidable, but it is hard to say how much is due to tax increases and government cuts, as opposed to the severe tightening of its capital infusions. The German economy, too, is slowing, even with no sudden changes in fiscal policy, tied as it is to the Eurozone.
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