How Big were the Government Responses to the Recession?

Saturday, January 1, 2011

Working Group on Economic Policy: WP47

This paper estimates the size of Federal Government responses to the recession, other than the various Government financial stabilization programs, to be about $3.4 trillion over the 2008-2012 period. Of this total, $1.35 trillion, or 40%, was for spending programs; the remainder for tax cuts. Importantly, more than half (52%) of these responses have not yet taken place but will impact the economy in 2011 and 2012.

In addition to these sums, the Government committed more than $10 trillion to assist the housing and financial sectors, although the government’s actual spending was much less than its commitments, and its net spending after loan repayments and the sales of equity shares that it had acquired will be even less. However, the wide variety of financial stabilization efforts can’t be added to the other spending and tax cut efforts as commitments (especially net commitments over time) are measured in a different manner than spending or tax cuts, and the size of some commitments were unlimited or unknown. Nevertheless, it is appropriate to describe the size of the Federal Government’s responses to the economic recession as including both the more than $3 trillion in spending and tax cuts and the commitments for more than $10 trillion in various financial stabilization programs.

How Big were the Government Responses to the Recession?