The Great Recession Fiscal Policy: Analyzing Problems and Solutions
analytical Essay
1416 words
As a result of the Great Recession of 2007 to 2009, the United States government implemented various fiscal policies in an effort to stimulate the economy. How the government responded as well as how those responses will affect the U.S. economy into the future are the focus of a proposed research study. In order to ensure an appropriate focus for the proposed research study, problems in existing literature must be evaluated.
This paper is structured as follows. In order to better understand the Great Recession, the first section includes an examination on some of the key causes. Section two outlines some of the fiscal policy responses made by the government to the Great Recession. In the third section, relevant extant literature relative to studies on the fiscal policy implemented in response to the Great Recession will be discussed with a focus on potential problems. For problems noted, recommendations for resolution will be included. The objective of this paper is to consider relevant problems that might require further consideration in a research project about the long-term after effects of fiscal policy implemented by the U.S. government in response to the Great Recession.
The new millennium brought with it a housing boom which had reached an unsustainable level (Pollock, 2011). Housing prices grew rapidly, and Baker (2010) noted a rise in house prices of over 70% from 1995 to 2006. For example, he noted average home prices in Los Angeles rose more than $400,000 over the period of 1995 to 2006 and approximately $519,000 in San Francisco. Prices around the country increased substantially as well (Baker, 2010). To encourage homeownership, banks promoted creative financing options (i.e. adjustable rate, interest only,...
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...doi.org/10.1016/S0047-2727(99)00022-5
Kumhof, M., Laxton, D., & Leigh, D. (2013). To starve or not to starve the beast? Journal of Macroeconomics, 39(Part A), 1-23. http://dx.doi.org/10.1016/j.jmacro.2013.10.005
Lee, Y., & Gordon, R. H. (2005). Tax structure and economic growth. Journal of Public Economics, 89(5-6), 1027-1043. http://dx.doi.org/10.1016/j.jpubeco.2004.07.002
Miron, J. (2010). The case against the fiscal stimulus. Harvard Journal of Law and Public Policy, 33(2), 519-529. Retrieved from http://search.proquest.com.proxy1.ncu.edu/docview/347581655?accountid=28180
Ojede, A., & Yamarik, S. (2012). Tax policy and state economic growth: The long-run and short-run of it. Economic Letters, 116(2), 161-165. http://dx.doi.org/10.1016/j.econlet.2012.02.023
Pollock, A. J. (2011). Boom and bust: Financial cycles and human prosperity. Washington, DC: AEI Press.
In this essay, the author
- Explains that the united states government implemented various fiscal policies to stimulate the economy during the great recession of 2007-2009. how the government responded and how those responses will affect the u.s. economy into the future are the focus of a proposed research study.
- Explains the structure of the paper to better understand the great recession.
- Explains that the new millennium brought with it a housing boom which had reached an unsustainable level.
- Explains that the housing bubble created the illusion of prosperity, but when the bubble burst during the great recession, homeowners lost nearly $7 trillion in perceived equity, resulting in bank failures or demands for rescuing.
- Explains that the u.s. government implemented various fiscal policies aimed at economic stimulation in response to the housing crisis, economic vulnerabilities, and the great recession.
- Explains that fiscal stimulus efforts began in early 2008 with temporary tax cuts, a tax credit for first-time home buyers, and the american recovery and reinvestment tax act. government intervention in the recession was broad and significant.
- Analyzes the literature relative to the great recession, but the focus of the proposed research project is on fiscal policy implemented and the effects of same.
- Explains that research has also investigated the effect of various tax adjustments on government spending. their findings are contradictory.
- Explains that the proposed research project will focus on the specific tax policies implemented following the great recession of 2007 to 2009. testing of each variable will be conducted consistently using data published by a single, reliable source.
- Analyzes the lack of research regarding the estimated long-term effectiveness of only the fiscal policy implemented following the great recession.
- Suggests that additional research be completed isolating fiscal stimulus policies implemented from monetary stimulus, and estimates will consider projected data for another 5-10 years based on an analysis of trends and reasonable expectations.
- Explains that the great recession was not the first economic downturn, nor is it likely to be the last.
- Opines that the various stimulus efforts were a success and that unemployment rates are lower than they were during the great recession. however, questions remain as to how effective the stimulus package will be in the future.
- Cites adkisson, v., & mohammed, m. (2014). tax structure and state economic growth during the great recession.
- Describes auerbach, gale, and harris' views on activist fiscal policy in the journal of economic perspectives.
- Explains the bureau of labor statistics' local area unemployment statistics: current unemployment rates for states and historical highs/lows.
- Cites cebula, r. j., and hickman, b. g.
- States karagianni, pempetzoglou, & saraidaris, a. tax burden distribution and gdp growth: non-linear causality considerations in the usa.
- Explains kneller, bleaney, and gemmell's views on fiscal policy and growth in oecd countries.
- Explains the case against the fiscal stimulus in the harvard journal of law and public policy.
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- Explains that the sixteenth amendment gave the federal government the power to collect income taxes on all americans. income tax rates started at 1% for individuals earning over $3,000, and 6% on incomes over $500,000.
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In this essay, the author
- Explains that they will write about the u.s. federal government operations and how government leaders handle macroeconomic issues in our economy.
- Explains that monetary policy is the regulation of money supply and interest rates to stabilize currency and control inflation.
- Explains that the u.s. federal reserve monitors and controls monetary policy, national income, price stability, recession, and inflation. top leaders are working better at applying inside time lags in economic policy.
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- Cites anthony, p., ib economics: (section 3. 1-3.2) macroeconomics: national income and introduction to development, and (gdp image), 2011.
- Cites ensinger, d., "bill to repeal nafta stalled in the house," copyright 2007 economy in crisis.
- Explains that heffner, t., “unethical predatory practices,” copyright 2007 economy in crisis.
- Opines that more fed stimulus? - don’t count on it!
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- Explains that the president of the united states turned to friedrich a. von hayek and set off hints of austerity in motion.
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768 wordsRead More - One of the most interesting facets of The Great Recession of 2008 is that it didn’t really begin in 2008. The fiscal and monetary policy that prompted what we know now as the Great Recession of 2008 really began in 2006 and 2007. What was happening then and why did it take so long for the nation to feel the recession? The answers to those questions explain a great deal about how the Federal Reserve Bank operates and how the different ideologies of economics affect our nation (Sumner, 2011).
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- Cites thoma, m. (2013, august 27). the great lesson from the great recession.
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- Explains that fiscal policy is enacted through changes in government spending and taxes. the question about how effectively fiscal policies promoted recovery during the great depression has been a point of discussion among economists for several decades.
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- Opines that both hoover and fdr administrations ran deficits throughout most of their administration, but they were relatively small compared to the economic decline.
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- Analyzes how taxes and government expenditures affect the is curve and not the lm curve. the focus on maintaining a balanced budget should have been put on the back burner to help the economy recover faster
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In this essay, the author
- Explains that every few years, countries experience an economic decline which is commonly referred to as a recession. the paper will cover the issues which led to the recession, discuss the strategies taken by the government and federal reserve to alleviate the crisis, and look at the future outlook of the u.s.
- Argues that the economic hardships of the great recession began when interest rates were lowered by the federal reserve. the bubble forced banks to give out homes loans with unreasonably high risk rates.
- Explains how the federal reserve stepped in and bailed out the banks in an attempt to smooth over the financial struggles of the economy.
- Analyzes how the u.s. government and federal reserve stabilized the economy and prevented a second great depression, but left tens of millions of americans out of work, under-employed or earning significantly less.
- Analyzes how the nation's economic struggles during the great recession led to the current macroeconomic situation that deals with unemployment.
- Cites mcgraw-hill/irvin koba (2012) and love, n. s., & mattern, m.
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- Explains the impact of an initial change in planned investment (i) on production, income, consumption spending and equilibrium income. the size of the multiplier depends on the slope of planned aggregate expenditure line.
- Explains that even though the tax rate of india has increased from 32.44% in 2011 to 32.45% in 2012, there is the increase in gdp growth by rs. 1184937.
- Explains the fiscal multiplier, which is the ratio of a change in gdp due to changes in government spending.
- Explains that an autonomous variable is a variable that assumes not depend on the status of the economy. e.g. planned investment,government spending and taxes, equilibrium expenditure increases by more than the increase on autonomous expenditure.
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In this essay, the author
- Explains that the united states is the leading economy across the globe and experienced several tribulations in the recent past following the 2008 global recession.
- Opines that the u.s. economic growth will strengthen in 2014 with an average of 2.7 percent because of improved economic conditions and europe's emergence from its long slumber.
- Explains that the unemployment rate is still high, despite a yearly gain of nearly 2.3 million net new jobs. the lower-than-expected job growth is fueled by government hiring, weather, and obamacare.
- Opines that the rate of inflation will remain below 2 percent as economic growth increases moderately in 2014, due to decrease in energy prices and small increase in food prices.
- Opines that the united states is not concerned about recession because of moderate economic growth and improved economic conditions. the u.s. economy will have the ability to survive tribulations in emerging economies.
- Explains that the u.s. economy is still at a relatively slow pace of growth that has continued since the 2008 global recession.
- Argues that the federal open market committee should base its employment policy on the level of employment or unemployment through substantial improvement in labor market outlook.
- Concludes that the current macroeconomic situation in the united states is characterized by moderate growth because of better economic conditions brought by the events of 2013.
883 wordsRead More