Washington (CNN) -- President Obama will sign into law Thursday the Improper Payment Elimination Act -- an effort designed to slim down wasteful government programs and curb fraud in federal spending.

"The fact is, Washington is a place where tax dollars are often treated like Monopoly money, bartered and traded, divvied up among lobbyists and special interests," Obama said in March when he announced the initiative. "And it has been a place where waste -- even billions of dollars in waste -- is accepted as the price of doing business."

The act will use something known as payments recapture audits, which will pay auditors financial incentives to find improper payments. The White House said it could save $2 billion in taxpayer money over the next three years.

The new law also will toughen up rules for federal agencies, which will be required to report improper payments on a regular basis and elaborate on their efforts to avoid similar waste in the future.

"Well, I don't accept business as usual," the president said in March. "And the American people don't accept it either, especially when one of the most pressing challenges we face is reining in long-term deficits which threaten to leave our children a mountain of debt."

The Senate passed the Improper Payments Elimination and Recovery Act by unanimous consent June 23. The House passed it July 14.

Money says all the pay cuts get targeted at the military.

It amuses me that Obama doesn't point out that the biggest offenders in "Washington is a place where tax dollars are often treated like Monopoly money, bartered and traded, divvied up among lobbyists and special interests" are Congress itself.

Heh, I was tempted to link the AOL news reports breaking down spending by Congress on their staff and offices for the 2009Q3, 2009Q4 and 2010Q1.

It amuses me that Obama doesn't point out that the biggest offenders in "Washington is a place where tax dollars are often treated like Monopoly money, bartered and traded, divvied up among lobbyists and special interests" are Congress itself.

Who has a link to that video with the pennies?

I don't see the same pitch you see. I don't see this being billed as some sort of cure all. I see it as part of a much wider strategy to bring the deficit (a deficit created by Conservative economic policies over the last 8 years, mind you) under control.

Money says all the pay cuts get targeted at the military.

Government spending during a recessionary period increases aggregate demand and mitigates the downturn. We didn't spend enough to really get the job done, mostly because people think that the government is like a household and that it's finances should be managed the same. It's stupid, but it is what it is. Had we really spent what was needed in the way it was needed, I am quite sure we would be in a much better place, unemployment-wise, than we are now.

We need a massive public works project. Perhaps high speed rail, all over the country. Perhaps an apollo project on renewable energy. Something that stimulates aggregate demand in such a way that everyone starts hiring.

But, according to the people that want to withhold food to the starving, that's crazy. Sigh.

In macroeconomics, aggregate demand (AD) is the total demand for final goods and services in the economy (Y) at a given time and price level[1]. It is the amount of goods and services in the economy that will be purchased at all possible price levels.[2] This is the demand for the gross domestic product of a country when inventory levels are static. It is often called effective demand, though at other times this term is distinguished.
It is often cited that the aggregate demand curve is downward sloping because at lower price levels a greater quantity is demanded. While this is correct at the microeconomic, single good level, at the aggregate level this is incorrect. The aggregate demand curve is in fact downward sloping as a result of three distinct effects; Pigou's wealth effect, the Keynes' interest rate effect and the Mundell-Fleming exchange-rate effect.

Why Pigou's hypothesis prevents the liquidity trap

An economy in a liquidity trap cannot use monetary stimulus to increase output because there is little connection between personal income and money demand, John Hicks thought that this might be another reason (along with sticky prices) for persistently high unemployment. However, the Pigou effect creates a mechanism for the economy to escape the trap:
As unemployment rises,
the price level drops,
which raises real balances,
and thus consumption rises,
which creates a different set of IS-curves on the IS-LM diagram, intersecting the LM curves above the low interest rate threshold of the liquidity trap.
Finally, the economy moves to the new equilibrium, at full employment.
Pigou concluded that an equilibrium with employment below the full employment rate (the classical natural rate) could only occur if prices and wages were sticky.

The term liquidity trap is used in Keynesian economics to refer to a situation where monetary policy is unable to stimulate an economy, either through lowering interest rates or increasing the money supply.