<p>The fiscal policies to fight the great recession in the United States were not administered in a way that would allow us to assess this a natural experiment. However, there have been many situations in the past where there was such a natural-experiment setting, and that allows us to approximate the effect of these fiscal policies. For example, if a dollar of additional government spending, when such variation is experimental in nature creates two dollars in private consumption and investment (a multiplier of two), then when the government spends a trillion dollars in a way that may be endogenous, you could guess that the effect on private consumption would be something like two trillion. </p>

<p>The CBO used this methodology in their report <a href="http://www.cbo.gov/sites/default/files/02-23-arra.pdf" rel="nofollow noreferrer">Estimated Impact of the American Recovery and Reinvestment Act on Employment and Economic Output from October 2010 Through December 2010 (2011)</a>:</p>

<blockquote>
  <p>The American Recovery and Reinvestment Act of 2009 (ARRA) contains
  provisions that are intended to boost economic activity and employment
  in the United States. Section 1512(e) of the law requires the
  Congressional Budget Office (CBO) to comment on reports filed by
  recipients of ARRA funding that detail the number of jobs funded
  through their activities. This CBO report fulfills that requirement.
  It also provides CBO's estimates of ARRA's overall impact on
  employment and economic output in the fourth quarter of calendar year
  2010. Those estimates—which CBO considers more comprehensive than the recipients' reports—are based on evidence from similar policies
  enacted in the past and on the results of various economic models.</p>
</blockquote>

<p>Key findings:</p>

<blockquote>
  <p>On that basis, CBO estimates that ARRA’s policies had the following
  effects in the fourth quarter of calendar year 2010:</p>
  
  <ol>
  <li>They raised real (inflation-adjusted) gross domestic product (GDP)
  by between 1.1 percent and 3.5 percent,</li>
  <li>Lowered the unemployment rate by between 0.7 percentage points and
  1.9 percentage points, Increased the number of people employed by between 1.3 million and 3.5 million, and</li>
  <li>Increased the number of full-time-equivalent jobs by 1.8 million to
  5.0 million compared with what would have occurred otherwise, as shown in Table 1. (Increases in FTE jobs include shifts from
  part-time to full-time work or overtime and are thus generally
  larger than increases in the number of employed workers.)</li>
  </ol>
</blockquote>

<p>Another CBO paper, <a href="https://www.cbo.gov/sites/default/files/cbofiles/attachments/49925-FiscalMultiplier.pdf" rel="nofollow noreferrer">The Fiscal Multiplier and Economic Policy Analysis in the United States</a> (Whalen and Reichling (2015), discusses an economic parameter at the heart of these estimates, the fiscal multiplier.</p>

<blockquote>
  <p>The recession from 2007 to 2009 sparked wide interest in the economic
  effects of fiscal policy.  That interest is reflected in an ongoing
  debate over the size of the fiscal multiplier. This  working paper
  addresses three questions: What models do economists use to estimate
  that multiplier?  Why do estimates of it vary widely? How can
  economists use those estimates to judiciously analyze  U.S. economic
  policy?</p>
</blockquote>

<p>Tables 1 and 2 are of particular interest, they can help you understand the estimated contributions of various parts of the stimulus to the recovery by time and project type. 
<img src="https://i.sstatic.net/5PH8V.png" alt="multiplier by project type"></p>

<p><img src="https://i.sstatic.net/VsevJ.png" alt="multiplier effect over 8 quarters"></p>

CC BY-SA 3.0
2015-01-27T13:06:46.377Z
2015-02-09T14:25:19.923Z
2015-02-09T14:25:19.923Z
BKay
<p>What impact did fiscal policy actions taken during the Great Recession (2007-09) have on U.S. economic performance? </p>

<p>Bush passed the Economic Stimulus Act of 2008 and also the Emergency Economic Stabilization Act of 2008 which established the Troubled Assets Relief Program. Obama passed the American Recovery and Reinvestment Act in early 2009. 
Let me know if I missed something.</p>

<macroeconomics><fiscal-policy><government><keynesian-economics>
What impact did major fiscal policy actions taken during the Great Recession (2007-09) have on U.S. economic performance?
Amy
# What impact did major fiscal policy actions taken during the Great Recession (2007-09) have on U.S. economic performance?

(Asked by: username_0 on 2015-01-23)

What impact did fiscal policy actions taken during the Great Recession (2007-09) have on U.S. economic performance?

Bush passed the Economic Stimulus Act of 2008 and also the Emergency Economic Stabilization Act of 2008 which established the Troubled Assets Relief Program. Obama passed the American Recovery and Reinvestment Act in early 2009.
Let me know if I missed something.

**Tags:** macroeconomics, fiscal-policy, government, keynesian-economics

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## 1 answers

### Answer by username_1 on 2015-01-27. Score: 1

The fiscal policies to fight the great recession in the United States were not administered in a way that would allow us to assess this a natural experiment. However, there have been many situations in the past where there was such a natural-experiment setting, and that allows us to approximate the effect of these fiscal policies. For example, if a dollar of additional government spending, when such variation is experimental in nature creates two dollars in private consumption and investment (a multiplier of two), then when the government spends a trillion dollars in a way that may be endogenous, you could guess that the effect on private consumption would be something like two trillion.

The CBO used this methodology in their report [Estimated Impact of the American Recovery and Reinvestment Act on Employment and Economic Output from October 2010 Through December 2010 (2011)](http://www.cbo.gov/sites/default/files/02-23-arra.pdf):

> The American Recovery and Reinvestment Act of 2009 (ARRA) contains
> provisions that are intended to boost economic activity and employment
> in the United States. Section 1512(e) of the law requires the
> Congressional Budget Office (CBO) to comment on reports filed by
> recipients of ARRA funding that detail the number of jobs funded
> through their activities. This CBO report fulfills that requirement.
> It also provides CBO's estimates of ARRA's overall impact on
> employment and economic output in the fourth quarter of calendar year
> 2010. Those estimates—which CBO considers more comprehensive than the recipients' reports—are based on evidence from similar policies
> enacted in the past and on the results of various economic models.

Key findings:

> On that basis, CBO estimates that ARRA’s policies had the following
> effects in the fourth quarter of calendar year 2010:
>
> 1. They raised real (inflation-adjusted) gross domestic product (GDP)
>    by between 1.1 percent and 3.5 percent,
> 2. Lowered the unemployment rate by between 0.7 percentage points and
>    1.9 percentage points, Increased the number of people employed by between 1.3 million and 3.5 million, and
> 3. Increased the number of full-time-equivalent jobs by 1.8 million to
>    5.0 million compared with what would have occurred otherwise, as shown in Table 1. (Increases in FTE jobs include shifts from
>    part-time to full-time work or overtime and are thus generally
>    larger than increases in the number of employed workers.)

Another CBO paper, [The Fiscal Multiplier and Economic Policy Analysis in the United States](https://www.cbo.gov/sites/default/files/cbofiles/attachments/49925-FiscalMultiplier.pdf) (Whalen and Reichling (2015), discusses an economic parameter at the heart of these estimates, the fiscal multiplier.

> The recession from 2007 to 2009 sparked wide interest in the economic
> effects of fiscal policy. That interest is reflected in an ongoing
> debate over the size of the fiscal multiplier. This working paper
> addresses three questions: What models do economists use to estimate
> that multiplier? Why do estimates of it vary widely? How can
> economists use those estimates to judiciously analyze U.S. economic
> policy?

Tables 1 and 2 are of particular interest, they can help you understand the estimated contributions of various parts of the stimulus to the recovery by time and project type.
![multiplier by project type](https://i.sstatic.net/5PH8V.png)

![multiplier effect over 8 quarters](https://i.sstatic.net/VsevJ.png)


---

