The 2008 Recession
Between January 2008 and February 2010, employment fell by 8.8 million, the largest decline in American history. The 2008 Recession, which officially lasted from December 2007 to June 2009, began with the bursting of an 8 trillion dollar housing bubble. Job losses during the recession meant that family incomes dropped, poverty rose, and people all over the country were suffering. Things like this don’t just happen. Policy changes incorporated with the economy are often a major factor. In this case, all roads lead to one major problem: Deregulation. Deregulation originating from the Carter and Regan Administrations, combined with a decrease in consumer spending, and the subprime mortgage bubble all led up to the major recession of 2008.
Looking back to the Carter and Reagan Administration’s, you can begin to see where the Recession originated from. Prior to the Reagan administration, the United States economy experienced a decade of rising unemployment and inflation. Political pressure favored stimulus resulting in an expansion of the money supply. Reagan wanted to increase defense spending while lowering taxes, Reagan's approach was a departure from his immediate predecessors. Reagan enacted lower marginal tax rates in combination with simplified income tax codes and continued deregulation. During Reagan's presidency the annual deficits averaged 4.2% of GDP after inheriting an annual deficit of 2.7% of GDP in 1980 under President Carter. The real
inflation rate of growth in federal spending fell from 4% under Jimmy Carter to 2.5% under Reagan.
Not only did Carter and Reagan Administrations help cause the Recession, President Clinton helped. “Clinton then established official government policy to increase home ownership to 70%. Under President Clinton, the percentage of young families in poverty declined to 25 percent by 2000.” (Perry) But it then started up again with the recovery of “Reaganonomics” under President George W. Bush, reaching the 37 percent mark which led up to the 2008 financial crisis. “An act the U.S. Congress passed in 1933 as the Banking Act, which prohibited commercial banks from participating in the investment banking business. The Glass-Steagall Act was sponsored by Senator Carter Glass, a former Treasury secretary, and Senator Henry Steagall, a member of the House of Representatives and chairman of the House Banking and Currency Committee. The Act was passed as an emergency measure to counter the failure of almost 5,000 banks during the Great Depression. The Glass-Steagall lost its potency in subsequent decades and was finally repealed in 1999.” (Investopedia) Clinton repealed this act which limited the regulation of the banking industry. This allowed depository and investment banks to merge while the latter limited the regulation of financial products. The Carter and Reagan Adminstrations, along with Clinton led the United States to the 2008 Recession.
Consumer spending is the...