Obama's Economic Plan

Topics: Monetary policy, American Recovery and Reinvestment Act of 2009, Keynesian economics Pages: 3 (747 words) Published: September 13, 2010
Obama’s Economic Recovery Plan
The 2008 U.S Presidential election brought to power the Democratic Party’s candidate Barrack Obama to the oval office in the White House. The election had been marred with contentious issues of social, political and economic content. However, the issue of the economy got major attention as a result of the sub prime mortgage crisis, the ensuing credit crunch, an economy moving into recession and the bankruptcy of giants like Bear Sterns and Lehman Brothers, not to mention the bail out of the Insurance giant AIG and the woes of Detroit’s Big 3 automakers, the hallmark of the U.S automobile industry.

The Obama administration’s economic recovery plan is a two-pronged approach. The first half deals with massive investment in the factors of production, public infrastructure and new technologies to allow the United States to become more competitive and to raise aggregate demand in the economy. These measures aimed at propping up demand will be accompanied by a lax monetary policy with near zero interest rates that would be aimed at encouraging private sector credit off take and unfreezing credit markets. Under this fiscal stimulus plan, $787 billion will be spent to make the U.S economy more competitive and to raise demand.

The second leg of the economic recovery program is to restore confidence in and normalcy to financial markets. This involves a massive program to work with public and private partners and aim to prevent any other major bankruptcies, as was the case with Lehman and to work constructively with financial institutions through monetary and non-monetary measures so that those banks with toxic assets on their balance sheets become more secure and financial markets calm down.

Support for the Obama program is far reaching. If one picks up an economic textbook, the greatest admirer of Obama’s policies right now would be Sir John Maynard Keynes, the greatest economist of the 20th century along with Milton...

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