EOC206 Conference 3: Fiscal Policy
The dire outlook of the global economy in the second half of 2008 propagated unprecedented fiscal expansions of most countries. The fiscal stimulus and the coordinated monetary expansion stabilized the global economy in the aftermath of the financial meltdown in the U.S., preventing an employment collapse of the type experienced during the great depression.

Because of two factors: the collapse of the housing bubble with a significant decline in housing price and a sharp contraction in the construction industry, caused sever Great Recession. In order to stimulus economics, the Federal Reserve took both conventional and un conventional actions, reducing interest rates ti record lows and providing recession (Did the American Recovery and Reinvestment Act of 2009 Create Jobs 146-147). While the ARRA did not achieve tis initial goals, many including President Obama, consider it a major success. Actually is it very hard to support the claim that the ARRA was responsible for the turnaround in GDP growth early last year. This is because the turnaround was from productivity growth, which is part of the supply side of the economy.

The federal debt crisis is a contrived one; the real debt crisis is a household sector debt crisis, which is being resolved through a generational deleveraging process, which cut demand in the shot term and is effectively mitigated by necessary short-run federal deficits. The constraints for running large deficits, is inflation. In a deleveraging, inflation is desired, and vital in fact. So short-run deficits in a deleveraging recession are an important tool. However everyone agrees that the United States would be better off if it were able to reduce its deficit and eventually its debt, especially after the economy returns to more prosperous conditions. (Can U.SS deficit and debt problems be solved without