Question

In Chapters 17 & 18, we learn about Fiscal Policy and the Federal Budget. As you are well aware by now, our nation had to climb out of the deepest recession we have had over the last 80 years (the Great Recession was definitely the worst since the Great Depression). Going back to December 2007, when the recession first began, President Bush (in the last year of his presidency in 2008) initiated some policies. Then in 2009, President Obama was inaugurated and inherited the economy. What policies were initiated with regard to the recession that would be Fiscal Policy Tools by President Obama? Please post your own, original, specific links to articles, blogs, video, news footage, etc to support your point. Visit the links your colleagues are posting to learn about this event in our history.  Wikepedia and Investopedia are not acceptable sources! Neither are sites that have a bias or a mission of influencing politics. These sites include The White House (no matter who the President is, there is still a bias), The Heritage Foundation (conservative) and The Center for American Progress (liberal). Also, please do not simply do a Google search and pick the first thing that pops up, but actually do some research to answer this question. If too many people use the same source, I will not award full credit to those posting later. Finally, after learning about the National Debt, is there anything about it that you found interesting, or surprising? Explain!

Answer 1

First of all, it is very essential to acknowledge that federal government ran massive deficit since Obama took over presidency in 2009, but in totality the cumulative effect of government interest payment and debt burden would had created a knock on effect if FED had not intervened by a humongous bond and securities buying program.

QE had been an essential component of the policy making since it balanced the weight of what was an already gigantic government debt ceiling. Although it is fair to say that FED is an independent body administering the economic environment of US and the world, the Obama administration did support Yellen' decision making around the securities buying program, multi staged QE, lowering the targeted federal funds rate, etc.

As of September 2008, the Fed held close to $477 billion in federally-issued debt, out of a cumulative total of $5.8 trillion. Additionally, the Fed owned nearly 8 percent of all federal debt before the quantitative easing program began. In fiscal year 2009, the Fed then made net purchases of Treasury securities totaling $292 billion, followed by nearly $900 billion over the two-year period of 2010 and 2011 and $800 billion over the three-year period from 2012 through 2014. The Fed now owns $2.5 trillion in Treasury securities, or about 18 percent of all outstanding federal debt, which is well outside the permissible boundaries.

Federal Congress had noticed the FED's large payments to the Treasury securities in recent times. The federal deficit was lower in these years because of the Fed’s payments to the Treasury, and yet no taxes were raised, or spending cut. In 2015, Congress chose to take this practice one step ahead by requiring the Fed to make a special, one-time payment to the Treasury of an additional $19.3 billion. This required payment by the Fed was used to “pay for” expanded federal funding of highway construction and maintenance.

In totality FED and the Obama administration did attempt on constructive recreation of the debt laden economy by fiscal tools which did not necessary create headwinds and lead a very stable background for further expansionary policies.

Talking about debt ceiling and national debt levels, it was very surprising to see that US had been riding the storm around the debt levels and was constructively and silently restructuring the asset classes without making serious efforts to trim balances. This year FED plans to reduce their balance sheet and it would be interesting to see how that would play out considering Trump administration already lowered corporate taxes.

www.bis.org

This would contain correct statistical data nd facts. This might help your research.