The Impact of the 2008 Economic Crisis in the United States
1. Introduction
The article under consideration is dedicated to the root causes of the U.S. economic crisis, and possible ways for recovery through reversal of excessive consumption. The global economic crisis that started in 2008 was caused by a number of factors, including the collapse of the housing bubble, easy access to credit, deregulation of financial markets, and trade imbalances (Ferguson, 2009). The United States was one of the countries most affected by the crisis, with unemployment reaching double digits and GDP contracting by more than 3 percent in 2009 (Baily & Reisel, 2010).
In response to the crisis, the US government implemented a number of stimulus measures, including tax cuts and increased spending on infrastructure and education. These measures have helped to reduce the impact of the crisis and return the economy to growth. However, some economists have argued that these measures are not enough to ensure a sustained economic recovery and that more needs to be done to address the root causes of the crisis.
In this paper, I will firstly review the theoretical research on possible causes of the economic crisis in the United States. Then I will discuss the policy response to the crisis and stimulus measures implemented by the US government. Finally, I will examine the role of innovation and education in the economic recovery of the United States.
2. Theoretical research of possible causes of the economic crisis in the United States
There is a wide range of opinions on what caused the economic crisis in the United States. Some economists argue that it was caused by structural problems in the economy, such as trade imbalances or deregulation of financial markets. Others argue that it was caused by incompetent management or bad decision-making by financial institutions and policymakers.
A number of economists have argued that trade imbalances were one of the main causes of the crisis (Ferguson, 2009; Roubini, 2010). They argue that countries with large trade surpluses, such as China, were able to accumulate large amounts of foreign exchange reserves, which they then used to buy US debt. This led to a build-up of US debt and an increase in global imbalances. These imbalances were unsustainable and eventually led to the collapse of Lehman Brothers and other financial institutions.
Other economists have argued that deregulation of financial markets was one of the main causes of the crisis (Krugman, 2009; Stiglitz, 2010). They argue that deregulated markets are prone to bubbles and crises because there is no authority to prevent or control excessive speculation. In addition, deregulated markets are also less transparent, which makes it easier for investors to make bad decisions.
A number of economists have also argued that bad decision-making by financial institutions and policymakers was one of the main causes of the crisis (Flamm, 2010; Shiller, 2009). They argue that financial institutions lent too much money to subprime borrowers without properly assessing their ability to repay their loans. In addition, policymakers failed to properly regulate these activities or intervene when it became clear that a bubble was forming. As a result, when Lehman Brothers collapsed in 2008, it triggered a wave of defaults and foreclosures that plunged the economy into recession.
3. Policy response to the crisis and stimulus measures in vthe United States
In response to the economic crisis, President Obama signed into law a $787 billion stimulus package in February 2009 (Baily & Reisel, 2010). The purpose of the stimulus was to boost demand in the economy and create jobs. It included a mix of tax cuts and increased spending on infrastructure and education.
The stimulus package helped to reduce the impact of the crisis and return the economy to growth. GDP growth turned positive in the third quarter of 2009 and has remained positive ever since. Unemployment peaked at 10 percent in October 2009 and has fallen to below 5 percent in 2016. Inflation has also remained low, averaging less than 2 percent since 2009 (Bureau of Labor Statistics, 2017).
4. The role of innovation and education in the economic recovery of the United States
Innovation and education are important drivers of economic growth. They help to create new businesses and industries and provide the skilled workers that these businesses need to succeed. In the United States, innovation and education have played a key role in the economy’s recovery from the crisis.
The US government has invested heavily in research and development (R&D) since the crisis. In 2009, President Obama signed into law the American Recovery and Reinvestment Act, which allocated $787 billion for R&D (National Science Foundation, 2010). This investment has helped to create new businesses and jobs in fields such as clean energy, biotechnology, and information technology.
The US government has also invested heavily in education since the crisis. In 2009, President Obama signed into law the Student Aid and Fiscal Responsibility Act, which allocated $787 billion for scholarships, grants, and loan forgiveness for college students (American Council on Education, 2010). This investment has helped to increase access to higher education and provide opportunities for millions of Americans.
5. Conclusion
In conclusion, the global economic crisis that started in 2008 was caused by a number of factors, including the collapse of the housing bubble, easy access to credit, deregulation of financial markets, and trade imbalances. The United States was one of the countries most affected by the crisis, with unemployment reaching double digits and GDP contracting by more than 3 percent in 2009.
In response to the crisis, the US government implemented a number of stimulus measures, including tax cuts and increased spending on infrastructure and education. These measures have helped to reduce the impact of the crisis and return the economy to growth. However, some economists have argued that these measures are not enough to ensure a sustained economic recovery and that more needs to be done to address the root causes of the crisis.