Mr. Emanuel, in the current economic climate, the Obama administration's course of action has been to pursue aggressive countercyclical fiscal policies designed to prevent further economic deterioration. Critics of these policies argue that:1. The current fiscal stimulus is ineffective and has done little to create new jobs at a significant cost.2. Monetary policy is a more effective lever for reducing unemployment and facilitating the economic cycle, thanks to its shorter implementation period and the ability to act on small multiples. However, despite these arguments, significant evidence demonstrates the continued need for continued fiscal stimulus, beyond the monetary policies already undertaken:3. With interest rates near 0% and several extraordinary measures still in place, the Federal Reserve has reached the limits of monetary policy, requiring continued fiscal action.4. The American Recovery and Reinvestment Act has proven effective in reducing unemployment, demonstrating the potential of fiscal policy in the current climate.1. Current Fiscal Stimulus Many economists critical of the Obama administration have argued that sustained deficit spending negatively impacts the economy. Before the passage of ARRA, Feldstein stated that “spending should be large, rapid, and aimed at increasing aggregate activity and employment.” However, Feldstein later argued that because much of the stimulus package is designed to pay off slowly, it inherently works against the intent of countercyclical policy. John Taylor, creator of the fundamental rule of monetary policy, agrees with this assessment, also citing the statistical insignificance of the 2001 and 2008 tax cuts due to the increase in consumers... middle of paper... n inaccessible in the current recession. Additionally, large fiscal stimulus can reduce loan defaults by increasing liquidity and reducing the need for exceptional lending programs by the Federal Reserve. With the possibility of a double-dip recession still looming, prudent fiscal policy requires stimulus that can dampen GDP growth for several years. During a normal recession, critics would be right to argue that monetary policy would be ideal to ease the recession. economic cycle. However, due to the financial crisis, many standard monetary instruments have been depleted, requiring extraordinary fiscal stimulus. ARRA and other discretionary fiscal measures have succeeded in avoiding a further reduction in employment and GDP, and the current recession has demonstrated that fiscal policy has been effective in promoting economic recovery..