Krueger's and the Council of Economic Adviser's Views on Great Recession (Essay Sample)

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Krueger’s and the Council of Economic Adviser’s Views on Great Recession
The Great Recession had negative effects across the world with its effects still being felt. The US economy has faced several challenges in trying to recover from the recession. The GDP shrank with increased unemployment rates where over 15 million people were jobless. According to the Council of Economic Advisers (CEA), the effects were far reaching affecting the labor market and productivity. The jobless population rose by 3 million in the US with collapse of strong financial institutions like Lehman Brothers among others. The CEA and Kruger have shared opinions on how recovery could be achieved and further recessions prevented. The major focus on fighting recession according to Kruger (24) was on improving labor participation, income distribution and increased income injection into the market. Can president Obama’s focus on the middle class catapult economic recovery from the Great Recession?
Kruger focused on the middle class in contributing to the recovery from the recession. The dependency on foreign oil for energy has reduced due to increased domestic energy production. This has reduced US foreign borrowing and reduced the current account deficit thus leading to conducive environment for recovery. CEA (20) observe that having government legislations and policies to curb extremities in economic recovery were best suited to control recession. The American Recovery and Reinvestment Act was made to inject more money into the economy and act as a stimulus to recovery. There was $787 billion in tax cuts and spending by the government was to increase the recovery process. The tax cuts led to over $200 billion in American families’ pockets, thereby translating to more spending power. The CEA also focused on housing markets and an action towards stemming the rising the increasing foreclosures. While the CEA adviced the government to focus on all-out policy actions and monetary policy controls, Kruger focused on the labor markets as the major factor driving economic recovery.
Kruger (15) observes that improving structural imbalances that compromised the US economy before the recession contributed to growing the economy. From both sources of economic recovery, it is clear that focusing on "middle-class economics" has the power to transform the economy and bring economic recovery. There was collapse in household wealth as well as global trade that precedent the Great Recession. Kruger argues that with more purchasing powers and more disposable income, the economy could recover faster. The graph on household net worth has been increasing, an indication that economic recovery is based on household net worth. Looking at the components of the US real GDP growth (CUE 23), consumer spending increased from 2.0% to 2.8% with a matching GDP growth of 2.1% to 2.8%. Other components recorded a decreased growth, for instance, business fixed investments reduced to 5.1% from 5.2% and residential investments reduced to 4.7% from 5.9%. Measures targeting household spending have great effect on the recovery of the economy.
The U.S. CAE focuses on monetary policies, structural imbalances and international trade in controlling recession while Kruger argues that focus on labor contributions from the population and income distribution arising from labor functions are more effective in economic recovery. Both parties have the final focus on the families in increasing their disposable income. The demand and supply is imbalanced and thus prices can be affected leading to economic instability. Decline in family wealth, consumer spending and labor involvement in generating consumer products and disposable income affect progress of the economy (CEA 28). Policies designed by the federal government are to protect the household from externalities including unemployment, extortionist prices and exploitive labor earnings. Tax-cuts lead to more disposable income and thus policies by the government are geared towards encouraging more spending by the households that translate to recovering economy.
Kruger does not focus on international trade that affects the economy in the cur...