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Testimony

Economic Stimulus and Unemployment Insurance

Peter R. Orszag

Mr. Chairman and Members of the Committee, it is an honor to appear before you to discuss current economic conditions and proposals for economic stimulus. In my testimony, I evaluate stimulus proposals using a series of common-sense principles for an effective stimulus package.

These principles reflect the idea that an effective package needs to do two things: maximize the extent to which it directly stimulates new economic activity in the short term, and minimize the extent to which it harms the long-term budget outlook. Similar principles have been endorsed by the Chair and Ranking Member of the House Budget Committee, as well as by the Chair and Ranking Member of the Senate Budget Committee, in a recent statement.

If anything, recent economic releases have underscored the importance of these principals. Real Gross Domestic Product fell during the third quarter of 2001 and employment declined substantially in October…

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