The White House is urging the Congress to pass measures to extend benefits for the jobless and aid states that are facing financial difficulties.Obama’s Democratic allies are facing congressional elections in November so they are cautious about the additional spending.A bill that passed in the House of Representatives last month authorized about $80 billion in new spending and added $31 billion dollars to the deficit.Obama also created a separate bill that would provide cash to states which will prevent teacher layoffs, but a $23 billion version of that legislation recently failed in the Senate.The U.S. deficit, which reached 1.4$ trillion in 2009 is estimated to hit $1.6 trillion in 2010.
CONNECTION
In chapter 8, we learned about stabilization policies.One of these stabilization policies is the fiscal policy.Fiscal policy can be divided into two types: automatic and discretionary.Discretionary fiscal policy is when the government has to make policy decisions to aid economic difficulties.This policy has three stages: recognition lag, decision lag, and outside lag.Currently, the bill proposed by the White Hose to increase spending is in the “decision lag” stage, because Congress has to decide whether or not to pass the bill.The bill that passed in the House of Representatives last month which authorized $80 billion in new spending is in the “outside lag” stage.It will take some time before this additional spending in the economy will take full effect.Another concept that ties in with this chapter is public dept.Since the U.S. is spending all this money into their economy, they have to borrow money from foreign countries such as China.This dept will have negative impacts such as burden on future generations.
REFLECTION
It is not surprising that the U.S. is going into further dept.Before Obama stepped into office, Bush spent billions of dollars on war efforts in the Middle East.No one is certain that the money put into the war against terrorism was effective.If Obama plans to spend more money on the economy, it is a good idea to retrieve troops back from the Middle East and get out of the war.Obama not only made passing the budget a priority, but he has made it a priority to extend amenities to illegal immigrants.Illegal immigrants make up a significant portion of the American population, and they are taking advantage of the additional spending on public services as well.The more money Obama borrows, the more he is making life in the future a longer version of the depression that he is borrowing to avoid.
Economic data for January of this year showed the strongest one month GDP gain in more than three years.The 0.6% GDP growth figure, released by Statistics Canada, surpassed market expectations of a 0.5% gain, and helped set some new benchmarks.These numbers was driven largely by the goods producing sector, as opposed to consumer spending and housing.Manufacturing produced a 1.9% gain, marking advances for the fifth straight month.These numbers suggest that the Canadian manufacturing sector is making a healthy comeback from the deep declines suffered through the recession.Car makers such as General Motors and Honda are planning to add shifts and increase output at Ontario factories to meet the demands of the auto industry.
CONNECTION
Chapter six was focused more toward macroeconomics.We were introduced to the concept of gross domestic product (GDP) as a way of measuring economic growth and standard of living of a country.The 0.6% growth in GDP mentioned in this article indicates that there is an increase in productivity of goods and services within our country.This increase will improve the standard of living for many Canadian citizens because companies are hiring more workers to meet their demands.Many workers will see an increase in their income which leads to more spending, and ultimately contributing to our economic growth.Also prices may rise due to the increased demand for goods and services since businesses are currently operating at their full potential again.
REFLECTION
The recession not too long ago complicated the lives of many people.Unemployment rates were increasing from month to month and it appeared to get worse as time passed.With this recent report, the light is once again shining through the deep declines suffered through the recession.Many Canadians are back to work and supporting their families with fewer difficulties.In order for our economy to fully recover, this trend needs to continue though out the year so consumers can spend more and further stimulate our economy. With the Olympics bringing in revenue and the increasing employment rates in the summer from students, I believe that we are on a stable road to recovery.
Lately, there has been a trend where airlines are no longer accepting cash on their flights. Beginning February 1, 2010, American Airlines will be joining the “cashless cabin” club. Any passengers who do not have access to a credit or debit card will not be able to purchase food, drinks, or duty free items. There is a controversy where people have stated that bank notes quote “This note is legal tender for all debts, public and private" but yet they are prohibited from using them while on commercial airlines. The US Treasury Department states that although United States coins and currency are legal tender for all debts, public charges, taxes and dues, there is no law stating that a private business, a person or an organization must accept currency or coins as for payment for goods and or services.
CONNECTION
In chapter 7, we were introduced to the concept of money and the Canadian banking system. Exchanges first took place with the use of barter; the process which a good or service is exchanged without the use of money. Today the money we use is in the form of bank notes. Bank notes are fiat money, which means there is no gold or other items of value matched behind the notes. They are legal tender and can be used to purchase goods or repay debt. The controversy with airlines not accepting cash is that they are violating the law which states that bank notes and coins are legal tender; but the US Treasury Department states otherwise. There is no law stating that private businesses must accept currency or coins for payment of goods or services. This means that private businesses can choose to operate on a barter system if they wish. In this case airlines can choose to accept credit or debit cards as the only method of payment.
REFLECTION
Many airlines are jumping onto the bandwagon of having a “cashless cabin”. These airlines include United Airlines, Continental Airlines, Southwest Airlines, JetBlue Airways, Alaska Airlines, Frontier Airlines, and the recently joined American Airlines. As for the controversy of bank notes and coins not being accepted on certain airlines, I believe that the majourity of the crowd who have this issue are seniors. Most adults these days own and use credit or debit cards regularly. The issue with not having a credit or debit card is minor. As mentioned in the article, flight attendants or other people will be more than happy to cover the costs in exchange for cash. With this new cashless rule in place, it will bring many conveniences to airlines. For example flight attendants will no longer have to carry change and deal with different currencies. In a business perspective, airlines will be saving money because going cashless will simplify the accounting immensely and the battery operated machines will make it easier to track and adjust inventory. On top of that, customers will spend more money because they will not have to worry about breaking bills and carrying change. Customers will not face buyer’s remorse until the credit card bill comes at the end of the month. I support the fact that airlines are taking the initiative towards starting a trend of a cashless society.
On Wednesday December 9th, 2010, the House of Commons passed legislation to enable the provinces to harmonize their sale taxes.This new tax will be called the “HST”, short for harmonized sales tax.In the House of Commons, the HST bill was passed by a vote of 253-37, where only the NDP opposed the legislation.Ontario and BC plan to put this new tax in effect on July 1, 2010.Many consumers are not in favor with the HST mainly because they have to pay more tax on items such as gasoline and appliances bills.Businesses on the other hand will profit because they will no longer have to pay tax on inputs such as materials and supplies.
CONNECTION
Chapter 3 was about the role of government in an economy.In chapter 3 we learned about economic stabilization.It states that when economic conditions were poor governments used to intervene and increased their spending on goods and services, and taxes would decrease to encourage people to spend disposable income.When the economy was booming, the government would increase tax rates to decrease the level of government spending and to reduce government dept.Currently the Canadian Government approved of the HST, but not everyone agrees that our economy is flourishing at the moment.We are still recovering from and economic recession but the government feels that new tax laws should be introduced.
Chapter 4 covered more about the government in Canada.It talked about the concept of GDP; the value of all goods and services that a country produces in a year.Since the HST is suppose to reduce the cost exports in Ontario and other business operations, we should be seeing a gradual increase in our GDP in the years to come.
REFLECTION
With the introduction of the HST, many consumers are aggravated.Previous products and services that were PST exempt will now have HST applied to them.Even going out to a restaurant for dinner will cost more than before.If the government is introducing the HST in hopes of improving the profits of businesses and ultimately improving our economy, then why are they delaying until July 1st to put the tax in effect?With the Olympics just around the corner, it would be more logical to introduce the HST early in the year so we can benefit from this event.Also by introducing the HST in the summer, Canadians will already have spent a large amount of money during the Olympics and will be paying off credit card bills.The economy is finally starting to recover and the government suddenly decides to bombard us with a new tax, great move.
