Did President Obama Take Necessary Steps to Take the United States out of the Great Recession

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The 2007/2008 financial crisis is widely regarded as the worst financial crisis since the Great Depression. What began as a housing bubble and a rise in foreclosures, in the United States, lead to a domino effect of financial institutions collapse. What was named a credit crunch quickly became a full on financial crisis, pushing real GDP levels down to a negative 8,9% in 2008 (1), such figures had not seen since the Great Depression. This essay argues that President Barack Obama has taken the necessary steps to take the United States out of the “Great Recession” and that the US government’s response has been proven successful combining fiscal stimulus and hints of austerity and implementing them in the appropriate times.

Despite the major efforts of the expansionary monetary policy of Federal Reserve program (Quantitative Easing) to prevent the banking system from collapsing (2), the economic crisis took its devastation toll. The monetary policy had done all it could setting in motion the $700 billion bank bailout bill on October of 2008. The bill established the Troubled Assets Recovery Program (TARP) in order to instill confidence in the distressed banks and financial institutions (3). Keynesian economics became the centre of attention and in 2009 president Barack Obama introduced the fiscal stimulus plan of 840 billion dollars called the American Recovery and Reinvestment Act (ARRA) (4), a plan which would rescue the country over the period of 10 years, the majority though would have to be spent in the first three years to increase short-term aggregate demand. The stimulus plan had three main components: tax cuts for families and small businesses with a budget of 290.7 billion dollars; help for the unemployed and those i...

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...ty and Transparency Board (2009). The American Recovery and Reinvestment Act. [ONLINE] Available at: http://www.recovery.gov/arra/Transparency/fundingoverview/Pages/fundingbreakdown.aspx. [Last Accessed 05 February 2014]. (4)

Reinhart, Carmen M. and Rogoff, Kenneth S. , (2014). Recovery from Financial Crises: Evidence from 100 Episodes. American Economic Review Papers and Proceedings. 32 (2), pp.1-11. (7)

The Economist (2013). Sovereign doubts. [ONLINE] Available at: http://www.economist.com/news/schools-brief/21586802-fourth-our-series-articles-financial-crisis-looks-surge-public. [Last Accessed 05 February 2014]. (2)

U.S. Department of the Treasury, Bureau of the Public Debt (treasury.gov). TARP Programs. [ONLINE] Available at: http://www.treasury.gov/initiatives/financial-stability/TARP-Programs/Pages/default.aspx. [Last Accessed 05 February 2014]. (3)
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