Economic Stimulus: Issues and Policies

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 but there are disadvantages, including leaving the government holding large amounts of mortgage debt. X