Macro and Micro Economics of The Bailouts and George W. Bush and Barack Obama’s Fiscal Policies Different economic times call for different measures. When faced with different economic situations, different administrations take different courses of action to control the situation. The US Government has had to implement different fiscal policies in the past in order to save economic situations. Some of these have even been through bailouts to save firms or even industries from collapse. One good example could be the bailouts during President George W. Bush’s time as president of the US.
Some of the fiscal policies the Bush Administration initiated ended up influencing the policies during the Obama administration. In 2008, the Bush administration initiated several bailouts. First, there was the bank rescue where the Treasury got authorization to buy non-performing and risky debt from several lending institutions. The intervention to save the banking institutions came as the Emergency Economic Stabilization Act of 2008 (Bovenzi, 2015). It aimed at restoring liquidity and confidence to the banking industry. In the same year, the government also came to the aid of Fannie Mae and Freddie Mac.
The two mortgage firms risked collapsing. Another bailout that stands out was that of The American International Group that was facing serious financial trouble. All these bailouts increased the country’s debt by a tremendous margin (Phillips, 2008). The Bush administration and the Obama administration have some similarities as well as differences in the way they responded to economic situations. That is well demonstrated by the fiscal policies they used. The two administrations increased spending on defense. They also made use of expansionary fiscal policy to fight the recession.
In their attempt to stimulate economic growth through expansionary policy, they ended up raising US debt. Another similarity is that both took steps to attend to the costs of healthcare that were rising (Leonhardt, 2013). While Bush used the Medicare Part D prescription drug program to address this, Obama passed the Affordable Care Act (Obamacare) in 2010 to address the same issue. There are some policies that are unique to each administration. By passing the Bankruptcy Prevention Act in 2005, Bush made the Subprime Mortgage Crisis worse.
It became harder for people to declare bankruptcy, and this led to an increase in mortgage default. The TARP bailout in 2008 was a move by the Bush administration to address the financial crisis of 2008 (Bartlett, 2012). Although it saved the US financial system, it raised US debt significantly. From 2009, Obama spent the TARP funds to help subsidize homeowners that were facing mortgage challenges. The passing of the Economic Stimulus Act served to create in the infrastructure and education sectors. It helped ease the recession in 2009. As for Bush, he used tax cuts to battle recession in 2001 (Bartlett, 2012).
The actions of both presidents in as much as fiscal policy is concerned resulted in large deficits in the budget. That also resulted in huge debts in the country. Given their approaches, both presidents used fiscal policies to control the economic growth of the country. However, they did differ in a few policies as they faced different situations. One thing common to both administrations is the use of expansionary fiscal policy. It is extensively used by both administrations.
They also both created debts for the country through their policies that led to huge deficits in the budget. References Bartlett, B. (June 12, 2012). The Fiscal Legacy of George W. Bush. The New York Times. Bovenzi, J.F. , (2015). Inside the FDIC: Thirty Years of Bank Failures, Bailouts, and Regulatory Battles. Hoboken, New Jersey: Wiley Leonhardt, D. (Jan 3, 2013). For Obama, a Victory That Also Holds Risks. The New York Times, p. A16. Phillips, M.M. (2008). Government Bailouts: A U. S. Tradition Dating to Hamilton. The Wall Street Journal.