The Great Recession Fiscal Policy: Analyzing Problems and Solutions

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,...

... middle of paper ...

...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.