In December 2007, caused by the housing bubble, what is known as the Great Recession began (“The Great Recession”). Prior to this, people kept buying houses with high risk loans, because their mortgage-backed securities were technically making profits when the house values increased; however, when the house values started to decrease, those securities became worthless, thus people were not able to pay for the house—many people had their house confiscated. As a result of this wealth loss, consumer spending decreased sharply and many banks collapsed. The U.S. government tried to combat this issue, but many of the fiscal policies they had created were controversial because of their interference in the economy. One debate sparked on whether the government should spend its money to stimulate the economy by cutting taxes and creating jobs. While it is argued that the government should have not played excessive role in the economy, implementing the American Recovery and Reinvestment Act was clearly the better option because it prevented the worst-case scenario of economic failure—one like the Great Depression—that could have occurred otherwise without it.
The American Recovery and Reinvestment Act, or ARRA, also known as the stimulus package, was signed into law by President Barack Obama with a primary goal to combat the economic downturn. The measures are worth $787 billion, which included tax reliefs, expansion of unemployment benefits, and other social welfare provisions and domestic spending in education, health care, and infrastructure, including the energy sector (“About ARRA”). In the voting process, the bill was approved first in the House then in the Senate; no one from Republicans voted for the bill in the House, and no Democ...
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