The Great Recession Fiscal Policy: Analyzing Problems and Solutions

analytical Essay
1416 words
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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Kumhof, M., Laxton, D., & Leigh, D. (2013). To starve or not to starve the beast? Journal of Macroeconomics, 39(Part A), 1-23.

Lee, Y., & Gordon, R. H. (2005). Tax structure and economic growth. Journal of Public Economics, 89(5-6), 1027-1043.

Miron, J. (2010). The case against the fiscal stimulus. Harvard Journal of Law and Public Policy, 33(2), 519-529. Retrieved from

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.

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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