ECONOMIC REPORT OF THE PRESIDENT

Figure 1-7
Civilian Employment in the Great Depression and Great Recession
Index, 1929/2008=100
110
105
2008=100
100
95
1929=100
90
85
80
0 12 24 36 48 60 72 84 96
Months from January 1929/2008
Note: Civilian employment of those ages 16 and older for 2008 series; ages 14 and older for 1929
series. Orange markers represent annual averages.
Source: Bureau of Labor Statistics,; CEA calculations.
shelved investment plans and consumers cut back on spending. The financial
crisis also had wide-ranging effects abroad, and global trade suffered a
much more drastic fall between 2008 and 2009 than during the first year of
the Great Depression (Figure 1-8). In short, as the Obama Administration
began, the United States faced an economic crisis of historic proportions.
The Policy Response
The short-term policy response in the United States to the global
financial crisis in 2008-09 was aggressive, swift, and—by the preponderance
of evidence from many private-sector, academic, and government analyses—effective.
It included a combination of aggressive aggregate demand
management driven by expansionary fiscal and monetary policy and shortterm
financial stability measures that prevented the risks of the crisis from
compounding further.
Fiscal Policy
The fiscal response began in early 2008, well before the height of the
financial crisis, as the economy began to slide into recession. Congress and
the Bush Administration enacted the Economic Stimulus Act in February
2008, cutting taxes for low- and middle-income households while providing
30 | Chapter 1