Government Fiscal Policy - Essay Example

Between 2007 and 2009 the United s economy entered into its worse recession since the great depression. The citizens of America were screaming out for help from the government. Barack Obama was in a tough position, but he acted upon the request of its citizens by approving the infamous stimulus package. The stimulus package was a fiscal policy strategy that was used to jumpstart the economy. This package included bank bailouts, tax rebate checks, and other stopgap measures to stop the slowdown in the economy.

The cost of this controversial package was $787 billion. One of the segments of the economy that benefited the most was the banking industry. The banks in the United States had been acting unethically giving out loans to people that did not quality in order to boost their profits. A lot of Americans lost their homes in the middle of this fiasco. The stimulus package helped save over 3.5 million jobs in America particularly jobs in the manufacturing and construction sector. The Big 3 Auto makers also received financial help from the federal government.

The reduction in taxes helped put more money in to the hands of American citizens. Classical economy theory states that the economy is always capable of achieving natural level of real GPD or output (Cliffnotes, 2013). I do not think that classical economy theory would have applied to the economic issues the nation was facing. The United States needed governmental intervention back in 2007-2009 to recover from the recession it was facing. The impact of the economic stimulus package on the governmental budget was that it increased the national debt in the long run and in the short run it increased the yearly budget of the country.

ReferencesCliffnotes.com (2013). The Classical Theory. Retrieved October 28, 2013 from http://www.cliffsnotes.com/more-subjects/economics/classical-and-keynesian-theories-output-employment/the-classical-theory