GDP growth is approximately 1.5% and has remained at that level for 2
years. Inflation measured by CPI and GDP has been 1-2%, unemployment
went up to 7.3%, Federal Fundstarget rate is 3.5%,the Discount rate is
3.25% and the deficit is around $60 billion for the last year. What
fiscal and monetary policies can adress these facts?

If the United States economy were in this state, the desired goals of
fiscal and monetary policies would be to increase GDP growth to reduce
unemployment.

The low rate of inflation by historical standards ("Annual Inflation
Rate" by Timothy McMahon, Financial Trend Forecaster (March 23, 2005)
http://inflationdata.com/Inflation/images/charts/air2005323.gif) and
the Federal Reserve rates being significantly above the rate of
inflation indicate that the Federal Reserve rates are restrictive to
growth.  The government budget deficit is also quite low relative to
GDP in recent history (the 2004 budget deficit was $412 billion in
comparison: "THE NATION?S FISCAL OUTLOOK" Office of Management and
Budget, United States Government
http://www.whitehouse.gov/omb/budget/fy2006/outlook.html), making
fiscal policy also relatively restrictive..

Considering that inflation is quite low and that monetary policy is
restrictive, it would be desirable to promote economic growth, which
would reduce unemployment, by lowering the federal reserve rates below
the rate of inflation.  Furthermore, tax cuts and/or increased
government spending would represent stimulative fiscal policy that
would also promote economic activity, further increasing GDP and
reducing unemployment.  Even though the budget deficit would increase,
a moderate increase in the budget deficit would be easily supported by
the economy.

These were precisely the steps taken by Alan Greenspan and President
Bush during the recent recession to moderate the effects of the
collapse of the stock market bubble.  Now that unemployment has come
down, economic activity has increased, and inflation has begun to
rise, changes in monetary policy to make it more restrictive by
raising interest rates have already occurred.  While the Iraq war and
other factors have kept government spending high, hopefully fiscal
policy will also become less stimulative eventually.

Sincerely,

Wonko

not detailed enough for 25 bucks