Using the data I collected from the Bureau of Labor Statistics, World Bank, the Bureau of Economic Analysis, and the Trading Economics websites, I created a few graphs based on the information I found. The data indicates that the average unemployment rates were fairly low in 2006. There was actually a decrease in the average of new jobs created each month from the previous year. The numbers fell from 165,000 new jobs created each month in 2005 to 149,000 new jobs created each month in 2006. That’s a difference of 16,000 jobs. In addition to job growth being down, wages were reported to be at a record low in respect to the national income. The nation had not seen wages this low since we started keeping track of wage data in 1947.
Not only did wages drop, but compensation for benefits dropped as well. On the other hand, 1947 was the last time the nation had seen profits grow as much as they did in 2006. The average rate of unemployment began to rise between 2007 and 2009. Between 2008 and 2009, the average unemployment rate skyrocketed to 9.28 percent. In December 2008, unemployment reached 11.1 million. The report prior to that had documented 632,000 unemployed people. The yearly average rate of unemployment reached a peak high in 2009, at 9.61 percent. In December 2009, the unemployment rate actually rose to 10 percent. Unemployment hadn’t been that low since 1982. There was a gradual unemployment rate decrease in each of the following years. In September 2018, the unemployment rate dropped down to a low of 3.7 percent. It hadn’t been that low since 1969.Based on the information from the graphs, it’s apparent that the economy took a drastic turn beginning in 2008.
Yet things began to look bleak before 2008. As a result of higher energy costs and increased food prices, the yearly average rate of inflation for consumer prices rose dramatically from 2006 to 2008. Inflation rose from 2.226 percent in 2006 to a whopping 3.839 percent in 2008. Gas prices rose exceedingly high and so did the price of groceries. The cost of food went up by 4.9 percent. The average cost of gasoline went up by a staggering 29.6 percent. This was the largest percentage increase in gasoline prices since 1999. As prices rose, wage earners struggled to maintain their standard of living. Debt accumulated by consumers in 2006 were at record highs. Households with subprime loans couldn’t afford the interest payments on their homes and subsequently became delinquent on their mortgages. Credit card defaults and bankruptcy cases also skyrocketed in 2006. On top of everything else, the US government racked up a massive amount of debt with foreign countries during 2006. Foreigners held 45 percent of the shares of US Treasury. Interest payments grew to a staggering 37.3 billion dollars. All of these factors set up 2007 for a rough beginning.
Many subprime lenders filed for bankruptcy. This began to affect many other lending institutions in the US and abroad. In mid-2008, commodity prices fell. In September of that year, the financial crisis was officially in full swing. The average inflation rate then took a dive to an average of -0.356 in 2009. This isn’t the lowest it’s ever been. However, the last time it dove this low was in 1955. It rose for the next two years in a row to an average of 3.157 percent in 2011. Inflation fluctuated the next few years and bottomed out again in 2015 at 0.119 percent. This was partly as a result of gas prices lowering to the lowest they had been since 2008-2009. Households were able to spend their extra money on other things. 2016 saw a rise in inflation to 1.262 percent.
This was the result of the higher cost of gasoline, housing, and medical costs in the United States. 2017 also experienced an increase in inflation, averaging out to 2.13 percent. The United States has consistently maintained an unbalanced trade deficit. The United States stands as the second leading exporter in the world of goods and services. At first glance, that sounds like great news. The downside is that the United States ranks number one in the world on the number of goods and services it imports. Our dependence on others for oil is mostly to blame for this. Oil accounts for approximately 15 percent of the 80 percent of goods brought into the United States can be attributed to oil. Fortunately, advances have been made in respect to producing oil domestically. Capital goods account for another large portion of imports to the United States.
These imports account for roughly 25 percent of all imports. Another 25 percent of imports can be attributed to consumer goods. These types of items include toys, pharmaceuticals, clothes, and electronics. Food represents approximately 5 percent of import tothe United States and services serve as approximately 20 percent. The deficit grew to an all-time high in 2006 of 5.8 percent. With that said, the United States made some gains in this area. Foreigners are investing more and more in American companies and American assets. Manufactured products, capital goods, and material goods credited to services.
This portion of exports for the United States can be traced to two-thirds of the country’s exports. In 2006, the GDP in the United States grew 2.7 percent from the previous year. The absolute value of America’s GDP was measured at $13,855.89 million. In 2006, the United States ranked 12th in overall GDP. With that said, it’s important to mention that housing prices reached their highest in early 2006 and began a downward turn in late 2006 and early 2007.
In 2007, the top five investment banks reported approximately $4.1 trillion in debt. This happenedto account for almost 30 percent of the United States GPD that year. Homeowners began to borrow against their home loans and the United States home mortgage debt rose to a total of $10.5 trillion and private debt rose to approximately 290 percent of GDP in 2008. In an attempt to boost the economy and GDP, Obama activated bailout packages for banks and the FED enforced near-zero interest rates. The economy slowly began to recover from 2009 to 2012. GPD didn’t manage to reach the level it was in 2007 until 2011. In 2011, it was recorded that GDP in the United States rose 1.6 percent to $15,517.93 million. As you can see from the graph, the GDP in the United States steadily rose from that point until now. President trump has voiced that he would like to end 2018 with an overall increase in GDP of 3 percent. The Great Recession was that lengthiest recession since World War II.
It officially started in December of 2007 and ended in June of 2009. The government put a couple notable fiscal stimulus programs to work in an effort to pull the country out of its slump. In 2008, Congress voted in favor of the Economic Stimulus Act of 2008. This stimulus package gave low income and middle-income households tax rebates. Depending on an individual’s income and their marital status, they were given between $300 and $1,200. The package aimed to stimulate the economy by invigorating spending. Eligibility limits on mortgages were also adjusted in an effort to encourage more people to buy homes. The Act also allowed businesses to claim a depreciation allowance for eligible properties. Additionally, businesses were able to write off an additional amount of their investments on their taxes. In some ways the Economic Stimulus Act of 2008 was successful.
In some ways, it was not. The tax incentives for businesses and the rebates given to taxpayers helped the economy a little by increasing disposable income for spending. Unfortunately, the tax rebate checks issued to taxpayers didn’t come early enough to stop the Great Recession from happening. Also, spending by the government wasn’t balanced with the tax cuts. Regrettably, this created a five hundred-billion-dollar budget deficit. A policy the government implemented in response the Great Recession was the American Recovery and Reinvestment Act of 2009. A tremendous amount of money was spent on this recovery program. The goal of this policy was to create new jobs in the job market to help individuals to get back into the workforce. The American Recovery and Reinvestment Act of 2009 included immediate relief for families through tax reductions, tax credits, and additional unemployment benefits. It included a reduction in the taxes withheld from individual tax returns.
Those who were collecting veterans’ pensions, Supplemental Security Income benefits, and Social Security received additional payments. Congress extended the Alternative Minimum Tax shelter to the tune of seventy billion dollars. Families with three or more children were granted access to the child tax credit if they qualified as working poor. Between 2009 and April 2010, first-time homebuyers were granted an $8,000 tax credit. A $25,000 tax credit was also granted to students in 2009 and 2010. Sales tax was reduced on new car purchases in 2009. Those collecting unemployment benefits faired pretty well too. In 2009, their benefits were extended for an additional thirty-three weeks and the taxes on the first $2,400 they earned from unemployment was waived. The American Recovery and Reinvestment Act of 2009 also funded projects to modernize federal infrastructures in an effort to create new jobs I the economy. Health care was expanded through computerized medical records and the implementation of Obama’s Affordable Care Act. Approximately one hundred and seventeen billion dollars was spent in an effort to improve the nation’s education system. The plan also spent approximately eighteen billion dollars for science research and technology.
A portion of that money helped improve broadband infrastructure in inner city and rural locations to help boost competitiveness for businesses in those areas. Small businesses were given a total of fifty-four billion dollars in tax credits, loans, and tax deductions. Opinions on whether the policy was successful or not are mixed. Many found the policy to be too complicated and had difficulty understanding if they qualified for any of the benefits. Some even felt as though their taxes had gone up as opposed to going down. Small business owners felt that the guaranteed loans promised to them were difficult to achieve. There was a lot of criticism on how much money was spent on education and unemployment. There were critics who thought there should have been more money allocated for other areas of concern. Many suggested that the plan had too many obstacles in the way to make it effective. However, the reported numbers reflected between 1.6 and 1.8 million jobs had been created through the plan.
The number of saved jobs was almost double that amount. Those who support classical economics have the belief that the government should intercede as little as possible in the case of a recession. Those who are supporters of the Keynesian view believe the opposite. They are full supporters of the government stepping in through fiscal policy to get over a recession. The decline of the economy during the Great Recession was primarily due to the financial system’s inability to support the financial debacle it created it the first place. The economy had gotten to such a deplorable state that there was no way the government could have exclusively exercised the Classical perspective of economics. There was no choice but for the government to step in with monetary and fiscal policies to spark the economy. Consumer spending came to a halt, and many workers were hopeless in finding employment. The economy had no way to recover without the government’s assistance. Creating new jobs, saving the jobs about to be lost, and providing people with money to put back into the economy was the best solution the government could have taken. The economy can’t grow unless Americans have money in their pockets to build it back up. There is one policy implemented during the Great Recession that is still affected my family in the worst possible way. The policy I am referring to is the Affordable Health Care for America Act.
When Obama was running for his second term in office, one of his platforms was that he wanted to make healthcare affordable for everyone. At the time, my family had health care. I was well aware that there were many families who weren’t as fortunate. I really felt like all American citizens deserve to have health care. My husband and I had many arguments over the issue. Little did I know, I would regret every argument I put up in favor of Obama’s idea. To this day, I count my ballot for Obama one of the biggest and most regrettable mistakes of my life. Once the Affordable Health Care for America Act was put into action, our health care premium shot up from three hundred and fifty dollars a month to eight hundred and ninety-five dollars a month.
The coverage wasn’t even close to comparable to our old health coverage. After a few months of paying the new premium, we dropped our plan. We found that paying the tax fine at the end of the year and paying for doctor appointments and prescriptions in cash, were far less expensive than paying the outrageous premiums forced upon us by the Affordable Health Care for America Act. I’ll admit that I appreciated the extra money the Economic Stimulus Act of 2008 put in my pocket. Unfortunately, I can’t say that I assisted a great deal in building the economy with it. Most of it was spent on credit card debt and bills.
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