ECONOMIC REPORT OF THE PRESIDENT

action affecting income inequality since the 1960s and then with the growth
in income inequality since the late 1970s. The chapter finishes by highlighting
several of the President’s proposals that would further reduce inequality.
The Recovery Act: Restoring Growth
When the President took office in January 2009, the country was experiencing
the worst economic and financial crisis since the Great Depression.
In the previous year, private employers shed 3.6 million jobs, household
wealth dropped 16 percent, and the unemployment rate jumped from 5 percent
to 7 percent on its way to a peak of 10 percent. One important aspect of
combatting inequality is limiting macroeconomic downturns, during which
unemployment rises and earnings inequality rises along with it. By taking
timely, aggressive action to combat the financial crisis and economic downturn,
the Administration limited the extent to which inequality rose during
the Great Recession and its aftermath.
In February 2009, the President signed into law the American
Recovery and Reinvestment Act (Recovery Act) to provide countercyclical
fiscal support to the economy and to help boost employment, output, and
wages. The Recovery Act included a mix of aid to affected individuals, support
for State and local governments, public investments, and individual and
business tax cuts. More than a dozen subsequent fiscal measures extended
certain Recovery Act provisions and introduced additional countercyclical
policies, such as the temporary payroll tax cut in effect during 2011 and
2012. In total, discretionary fiscal stimulus from 2009 through 2012 totaled
$1.4 trillion and averaged around 2 percent of GDP (Furman 2015). The
Recovery Act, subsequent fiscal measures, financial policy measures, support
for the automobile industry, and the Federal Reserve’s independent
actions combined to substantially reduce the harm of the Great Recession,
in part by moderating the increase in unemployment that would otherwise
Box 3-1: Trends in Inequality
Income, wealth, and consumption inequality have increased
sharply in the United States in recent decades (Table 3-I). However,
while overall inequality of income and wealth has increased, some other
measures of financial inequality have decreased. For example, the gender
pay gap has narrowed in recent decades, even as it remains too large
(CEA 2016b). Similarly, while inequality in life expectancy at middle age
has also increased, some other aspects of health inequality show signs of
improvement.
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