Ending Hunger in America, 2014 Hunger Report Full Report | Page 56
policymakers would have to agree on additional fiscal stimulus measures. In 2009, the federal
government filled part of the vacuum in private sector demand with the American Recovery
and Reinvestment Act (Recovery Act), which added 3 million jobs between 2009 and 2010
and kept the unemployment rate from rising by an additional 1.5 percent.25 But it was still not
enough to compensate for the worst economic downturn since the Great Depression. In negotiating the terms of the Recovery Act, the White House and Congress clearly underestimated
the severity of the recession.
Since the Recovery Act, Congress has been reluctant to pump more fiscal stimulus into
the economy, raising concerns about the size of the federal deficit. Yet deficit reduction at the
expense of stimulus policies is shortsighted. In a weak economy, when public spending does
not crowd out private sector investment, job creation policies ultimately pay for themselves.26
As the unemployment rate falls, so does the federal budget deficit as a percentage of Gross
Domestic Product (GDP). As we see in Figure 1.5, unemployment rates and the federal deficit
have been closely joined since World War II.27
In 2011, President Obama proposed spending $447 billion on a stimulus plan that, according
to independent analysis, could create nearly 2 million jobs.28 He and most Democrats argued
that deficits should be reduced by changes that would affect taxes and spending for years to
come, thus allowing for job-creating investments now. But Congress rejected the proposal.29
Republicans argued that keeping taxes low gives incentives to employers to invest and expand
businesses. They also argued that by borrowing to finance job creation, the government was
Figure 1.5 The Close Relationship Between Unemployment Rates and Federal Deficits
13
7.5
11
5.0
9
Federal Deficit as % of GDP
2.5
7
0.0
5
Civilian Unemployment Rate
-2.5
3
-5.0
1948
1958
1968
1978
Shaded areas indicate U.S. recessions
Source: Federal Reserve Economic Data (2013).
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Bread for the World Institute
1988
1998
2008
1
2018
(Percent)
15
10.0
(-% of GDP)
12.5