However, it still has drawbacks, and the biggest problem is that the specified or allocated quantities may be wrong and fail to conform to market conditions. Moreover, the quantities, which are allocated in Beijing, may go wrong when it comes to provincial, municipal and county levels. Also, problems like rent-seeking, tunneling and corruption may also arise in the process.
According to the FRB/US model, both policies, if sustained, would lead to a substantial increase in the equilibrium federal funds rate. Higher spending of this amount would raise equilibrium interest rates by about 50 basis points; lower taxes would raise equilibrium rates by 40 basis points.