Identify the four types of government spending that the Obama administration’s 2009 fiscal policy focused on, and briefly explain the reason for each one.

Question

What will be an ideal response?

Answer 1

In 2009, much of fiscal policy focused on four types of government spending. One was construction spending on improvements to highways, airports, and bridges. These programs were intended to begin immediately, putting unemployed workers back on the job quickly. In addition, improvements in infrastructure are often viewed as having a good bang for the buck. A second category of spending was federal aid to state and local governments, who are required to run balanced budgets. As their revenues from taxes fell during the recession, they needed additional funds to keep teachers, police, and other public workers from losing their jobs. A third category was transfer payments. Unemployment insurance programs needed additional funding, as many people had lost their jobs. It was argued that these transfer payments would contribute more than a general tax cut because these financially stretched individuals would spend a larger fraction of their extra income. Fourth, roughly $200 billion was spent on health care, social services, and education.