The Troubled Asset Relief Program in 2008, the American Recovery and Reinvestment Act of 2009, and the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 successively helped the U.S. economy turn itself around. These three measures came at crucial times when the economy was facing the prospect of experiencing serious damage unless policymakers took decisive, targeted, and quick actions.
The Troubled Asset Relief Program was enacted in October 2008 so that the federal government could use $700 billion to stabilize the struggling financial system. Much of the first half of that money was spent injecting cash into troubled banks during the final months of 2008, ensuring that our financial system did not collapse. The American Recovery and Reinvestment Act was enacted in February 2009, implementing a series of tax cuts and spending measures that totaled $787 billion for almost two years through the end of 2010. Additional unemployment insurance and Social Security benefits started to flow almost immediately due to the Recovery Act, while it took until the summer of 2009 for infrastructure spending to start. Congress then enacted new payroll tax cuts and continued extended unemployment insurance benefits in December 2010 as the Recovery Act’s benefits ran out.
The result: Financial markets, the economy, and the labor market started to improve quickly after each measure had been passed and money started coming to key struggling markets. These three policy measures did exactly what they were meant to do—policymakers acted to avoid worsening economic conditions.