Essay on Fiscal Policies : The Current Recession

713 Words Nov 2nd, 2016 3 Pages
2009 Fiscal Policies The current recession (starting in December 2007) has caused a significant reduction in the economy. Throughout this recession, we have seen GDP decline lower than the potential level, unemployment rise from 5% to almost 10%, household wealth declining, and multiple other factors. In 2008 2.6 million jobs were lost. (Uchitelle, Louis) We need to place expansionary fiscal policies in our government to increase real GDP and private spending and investment (Krugman, Paul R., and Robin Wells). These changes will bring the economy back to equilibrium and out of a recession. The first fiscal policy that will bring the economy out of recession is to increase government spending. Franklin D. Roosevelt placed a New Deal policy to hire men to work on public projects. FRD’s New Deal was placed into effect from 1933-1938; unemployment was at 25% in 1933 and ultimately dropped to 19% by 1938 (Unemployment The Great Depression). If we implement a similar policy focused on improving and creating new roads, we can increase productivity, quantity of goods, and services supplied (Mankiw, N. Gregory). Another fiscal policy that would increase consumer spending is to decrease personal income taxes among the United States. Decreasing the middle to lower classes of personal income taxes will impact the economy more than decreasing the upper classes taxes. When personal income taxes are decreased, workers are able to keep more of their wages and spend their additional…

Related Documents