Macroeconomic Situation Is One of Essay

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While that was not the case for the past year, at this point, with two quarters of accelerating economic growth, tax cuts serve this purpose. Because there is a time lag between the implementation of tax cuts and their impact on the economy, it is recommended that they are combined with short-term stimulus as a two-pronged fiscal expansion.

For its part, the Federal Reserve has an expansionary policy in place already with its rock-bottom interest rates ("easy money"). The Fed should hold rates low until inflation sets in -- at present it is little more than a risk. The Fed should continue to use its commentary to promote an expansionist agenda as well. In concert with the actions of Congress, this will send an unambiguous signal that the Federal government intends to use all means necessary to pull the country out of recession, and will not ease off on its tactics until the country's economy has recovered.

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