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Years of Recovery and Reinvestment

Essay by   •  September 26, 2018  •  Coursework  •  4,378 Words (18 Pages)  •  317 Views

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Page 1 of 18

Michelle 21 - 56

Scott 57 - 92

Dave 93- 126

Collin 127 - 162

Raj 163  - 194

Chapter 1: 8 Years of Recovery and Reinvestment (21-56)

Recovery in Review

  • Employment and Wages
  • Added jobs for 74 months
  • Accelerated real wage growth
  • Output and Economic Growth
  • By the fourth quarter of 2013, per-capita real GDP had fully recovered to its pre-recession peak, and by the third quarter of 2016, per-capita GDP exceeded its pre-crisis peak by 4 percent.
  • Equity Markets, House Prices, Household Wealth, and Other Measures
  • Home prices and S&P has increased
  • Health care prices have risen at a slower rate

The Crisis and the Response

  • Once in a lifetime crisis
  • HOusing, employment etc worse than depression in 1929
  • Policy response:  
  • 2008- tax incentives to encourage business investment
  • Recovery Act: tax cuts and other temporary assistance that put cash in the hands of households who needed it immediately and who were likely to spend it, boosting aggregate demand.
  • Monetary policy - Fed to retain near-zero interst rate
  • Stabilizing Financial Markets -package of short term measures
  • Rescuing Automobile Market - GM and Chrysler bankruptcy/restructuring. Helped manufacturing industry
  • Supporting the Housing Market - help to refinance homes
  • Impact of Policy Response
  • Recovery Act - saved/recovered 6 Mil jobs

 The Administration has achieved its most substantial and immediate success in this respect in three areas: restoring economic growth, expanding health insurance coverage, and enacting a fairer tax code.

Chapter 1 continued (p. 57-64, Scott)

Four Continued Structural Challenges: Productivity, Inequality, Participation, and Sustainability

  • Administration addressed many barriers to growth, making sure that future growth is stronger and benefits are more widely shared. But, there are many ingrained barriers still to work on.
  • Productivity Growth
  • Huge slowdown in labor productivity from 2005-2015
  • Important contributor to living standards
  • How to spur
  • increasing public investment in infrastructure;
  • providing greater funding for research and development;
  • reforming the business tax code to better incentivize innovation and investment;
  • promoting high-skilled immigration;
  • continuing to improve education and worker training;
  • expanding trade, which can boost innovation through the spread of ideas across borders, greater specialization in innovative activities, access to larger markets by high- productivity firms, and expanded competition
  • Income Inequality
  • USA - highest inequality, increasing the fastest among G7 economies
  • Policies to help
  • Quality education - expand and access
  • Minimum wage - increase
  • Worker Voice/Collective Bargaining - greater support
  • Rents - reform
  • Tax reform
  • Labor Force Participation
  • Stable since 2013: (Baby boomer aging = decrease) + (increase in labor force workers)
  • Reduced participation rate for prime-age workers (25-54)
  • Policies to combat:
  • modernizing the unemployment insurance system and expanding wage insurance
  • expanding tax credits for low-income workers and raising the minimum wage
  • increasing workplace flexibility by increasing access to paid leave and affordable child care
  • Economic Sustainability
  • Guard against future downturns: Modify the design of automatic stabilizers
  • Unemployment Insurance - auto expand in times of need
  • Further curbs to entitlement costs in health care and limiting tax breaks for top %
  • Climate Change - carbon emissions and clean energy economy

Chapter 2: THE YEAR IN REVIEW AND THE YEARS AHEAD (p. 65-92, went to 98, Scott)

  • Year in Review
  • Real GDP & Consumer Spending up
  • Investment and Government Purchases up/down
  • More jobs added, Inflation low
  • Global, Productivity and Labor Force Growth a challenge moving forward
  • Years Ahead (based on policies)
  • Up: GDP, consumer spending, inflation (up then stabilize)
  • Down: Unemployment rate
  • Policy Developments
  • Fiscal Policy (restraint)
  • Discretionary spending limits, infrastructure improvements, tax credits
  • Federal - purchases up
  • State and Local - purchases weak, up and down
  • Monetary Policy
  • Federal Open Market Committee (FOMC) tightens monetary policy because confident inflation would hit desired target range (2%), but federal funds rate down
  • Labor Market
  • Recovery near to or to pre-recession levels
  • Jobs & Earnings up, Unemployment down
  • Growth: “Professional and business services” and “education and health services”
  • Decline: Mining and Manufacturing
  • Slack, some still
  • Long term unemployment rate still falling to pre-recession levels
  • Underemployment rate (Part time work, not by preference) still falling
  • Output
  • Consumer Spending - Up
  • Disposable Income - nominal wages, lower oil prices - upbeat sentiment
  • Debt to Income down, interest rates down

P 98 - 126 (Dave)

HOUSING

  • Housing market has recovered, but there are supply constraints, low affordability in some areas, and young people aren’t buying
  • National home ownership is down from historical average = young people not getting married or buying houses
  • Housing starts down = constrained supply = not meeting demand in long run could be problem
  • Houses now more affordable than average

BUSINESS FIXED Investment

  • Down overall because of slow growth in US and low oil prices,( IP investments up though) = threat to labor productivity
  • Investment only about 12% of GDP but has disproportionate effect because it affects labor productivity and future consumption

REAL Inventory Investment - has been down for awhile, which is unusal outside of recessions

Net Exports - strong dollar = bad for exports

  • Export grew a bit faster than imports, still a trade deficit

PRODUCTIVITY-

        Growth rate slowing over past decade because higher employment growth than gdp growth, recession lowered investment, less capital deepening

  • Lower productivity common in other nations too
  • Want to remediaite it by infastricture spending, investing in education/job training, TPP, encourage R&D

WAGES/PRICE Inflation

  • nominal wage inflation has increased with the strong recovery in the labor market. However, the pace remains below the pre-crisis pace.
  • Inflation was below 2% target of Fed mainly because of lower energy prices
  • Put the following 2 bullet points together and american workers have had some real wage gains :)
  • Household income has gone up; largest gains at bottom of income distribution

FINANCIAL MARKETS

  • Robust in 2016, investor sentiment cautisouly optimisitic, volatile equity markets, but overall up.
  • Equity markets were down at start of year then recovered

  • ERP: Consumption & Investment (Pages 127-162)

Collin

 

Interest Rates & Credit Spreads

...

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