Economic Stimulus: Issues and Policies PDF Download

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Category : Business cycles
Languages : en
Pages : 0

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Book Description
The National Bureau of Economic Research (NBER), in December 2008, declared the economy in recession since December 2007. With the worsening performance of the economy beginning in September 2008, Congress passed and President Obama signed a much larger stimulus package composed of spending and tax cuts. The American Recovery and Reinvestment Act of 2009 (ARRA, P.L. 111-5), a $787 billion package with $286 billion in tax cuts and the remainder in spending, was signed into law on February 17, 2009. It includes spending for infrastructure, unemployment benefits, and food stamps, revenue sharing with the states, middle class tax cuts, and business tax cuts. Also in 2008 and 2009, the government intervened in specific financial markets by providing financial assistance to troubled firms and enacting legislation granting authority to the Treasury Department to purchase $700 billion in assets. The broad intervention into the financial markets was passed to avoid the spread of financial instability into the broader market; but there are disadvantages, including leaving the government holding large amounts of mortgage debt. The need for additional fiscal stimulus depends on the state of the economy. Growth rates, measured by gross domestic product (GDP), after two strong quarters, were 2.1% in the fourth quarter of 2007, slightly negative in the first quarter of 2008, positive in the second quarter, a negative 2.7% in the third quarter, and a negative 5.4% in the fourth quarter. The contraction of GDP continued into 2009, with a decrease by 6.4% in the first quarter and a second quarter fall of 0.7%. However, after four consecutive quarters of decline, revised 2009 third quarter estimates indicate a real GDP increase of 2.8%.