Monday, April 22, 2013

Fiscal Policy and The Bailout

Paper from George Mason University

In 2009, Alexander Fink and Thomas Stratmann collaborated on a paper which illustrated, 

"Institutionalized Bailouts and Fiscal Policy: The Consequences of Soft Budget Constraints"

Read this paper, describe whether they proved their point. Using SOAPSTONE analysis methodology, think about whether or not they are successful with their position. After doing this, think about this is term of 4 years later.  Were they right?  Which topics were they accurate about and why?

This assignment is focusing on your ability to analyze a college paper, sift through a large amount of information in a short amount of time, and make your point.


  1. In our opinion, We think that their position was not successful because In many federal systems the upper chamber represents the states. The number of seats allocated to a state in the upper chamber is apportioned when the share of seats apportioned to that
    state does not equal the state’s share of the country’s population. In the U.S., for example, two Senators represent each state even though states differ greatly in population size. Consequently,relatively unpopulated states are overrepresented in the U.S. Senate.Disproportional representation in the upper chamber is a common phenomenon and is present in more than 70 countries worldwide. So this becomes a problem that governments have to deal with.

  2. The speakers of this report are two professors.
    The occasion of this report is a college paper that studies how soft budget constraints relates to bailouts.
    Its purpose is to find out factors that affect this relationship.
    The audience that will be presented with this information is federal based so it asks for the most accurate results since this data could be used to make future decisions.
    The subject is about economic factors and statistics concerning the German and European economy of businesses that need bailouts.
    The tone is serious.

    These professors are proving that institutionalized bailouts are sensitive to the political power of state governments. They also say that the more there is expected in bailouts, the higher the spending for special interests there will be. In general they are saying that bailout spending is not an efficient form of spending based on their data acquired.
    We believe that the information presented concerning the taxes, that revenues from state and local taxes mostly come from federal tax revenues, is not accurately calculated since their amount of variables they took in account were limited and did not fully represent the source of the revues and how they are spent. Based off on this information, we believe that in four years these statistics will not show an accurate representation of an economic model to base decisions on.