Transcripts of the monetary policymaking body of the Federal Reserve from 2002–2008.

That’s over ten years. But we have incorporated in our forecast the passage of that bill, and we have its effects on disposable income starting in October of this year. So it gives a fairly good pop to disposable income starting in the fourth quarter and into early next year. It is an important factor. From the political gridlock simulation in the Greenbook, you can get a sense of how important the fiscal package is in our forecast. We’d expect something closer to 4 percent GDP growth next year instead of 4¾ percent if political gridlock materialized.

In terms of the effects of the fiscal package on the economy, it is certainly the case that the staff’s forecast does not assume so-called Ricardian behavior on the part of households. We think that disposable income is going to show up in consumer spending. For some households that are liquidity constrained, it will provide an immediate boost to spending. For other households that are more forward-looking, some of this involves a pulling forward of a tax cut that was already planned. One would expect, therefore, a little less impetus to spending than might otherwise occur from that acceleration in the timing. But even that, in a present discounted value sense, is an improvement in permanent income. So those tax cuts contribute, and contribute importantly, to the growth in overall activity. If we took that fiscal stimulus out of this forecast—or alternatively, if we assumed that it happens but has no effects—there would be a more muted improvement in overall activity. We’d have a forecast with the unemployment rate still running at roughly 6 percent through the end of next year, which is in essence no improvement.

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