Thej fiscalj policyj usedj duringj previousj recessionaryj periodsj isj thej expansionaryj fiscalj policy.j
Thej expansionaryj fiscalj policyj allowsj thej governmentj toj influencej economicj conditionsj byj
providingj taxj cutsj andj increasingj discretionaryj governmentj spending.j Thej governmentj mayj
lowerj taxj ratesj orj increasej spendingj toj encouragej demandj andj spurj economicj activity.j
Conversely,j toj combatj inflation,j itj mayj raisej ratesj orj cutj spendingj toj coolj downj thej economy,j
inj whichj wej arej experiencingj atj thisj momentj withj currentj inflation.
Withj COVID-19,j thej governmentj hadj itsj “lessonj learned”j fromj thej pastj recessionj inj 2008j andj
beforej thej pandemicj turmoilj hitj thej market,j thej Fedj wasj offeringj $100j billionj inj overnightj
repoj andj $20j billionj inj two-weekj repo.j Throughoutj thej pandemic,j thej Fedj significantlyj
expandedj thej program—bothj inj thej amountsj offeredj andj thej lengthj ofj thej loans.j Duringj thej
pandemic,j unemploymentj ratesj werej notj asj highj asj whenj thej recessionj hit.j Alsoj thej housingj
marketj evenj wentj upj aboutj 11%j orj soj duringj thej pandemic.j Whenj thej greatj recessionj hit,j thej
housingj marketj wentj “downhill”j asj borrowersj couldj notj keepj upj withj paymentsj andj therej wasj
notj asj muchj helpj fromj thej governmentj then,j soj manyj lostj theirj homesj orj hadj toj shortj sellj andj
notj getj thej fullj equityj orj valuej ofj thej house.
Thej fiscalj policyj usedj duringj previousj recessionaryj periodsj wasj expansionary.j Thej
governmentj canj influencej economicj conditionsj throughj taxj cutsj andj increasedj discretionaryj
governmentj spendingj underj anj expansionaryj fiscalj policy.j Duringj thej COVID-19j pandemic,j
mortgagej forbearancej providedj enormousj reliefj toj homeowners.j However,j forj manyj
borrowers,j itj willj comej toj anj endj inj thej comingj months,j andj whenj itj does,j thej focusj willj shiftj
toj thej adequacyj ofj thej lossj mitigationj toolkit.j Naturally,j industryj expertsj willj lookj toj thej Greatj
Recessionj forj guidancej andj lessonsj learned.j Whenj theyj do,j itj isj criticalj thatj theyj understandj
thej differencesj betweenj thej twoj economicj crises.j Lookj atj homej pricej appreciationj andj
unemploymentj ratesj toj understandj thej differencesj betweenj thej crises.j Thesej twoj variablesj arej
importantj inj explainingj mortgagej delinquenciesj andj foreclosures:j negativej equityj andj
unemployment.j Thej unemploymentj ratej rosej fromj 4.5j percentj inj Decemberj 2006j toj 10j
percentj inj Octoberj 2009j duringj thej Greatj Recession.j Thej recoveryj wasj slow,j peakingj atj 6.9j
percentj inj 2013j andj fallingj toj 3.5j percentj inj earlyj 2020,j justj beforej thej pandemic.j Thej
COVID-19j unemploymentj shock,j onj thej otherj hand,j wasj muchj larger,j andj thej recoveryj wasj
morej robust,j withj thej unemploymentj ratej risingj fromj 3.5j percentj inj Februaryj 2020j toj 14.8j
percentj inj Aprilj 2020,j thenj rapidlyj fallingj toj 6.9j percentj inj Octoberj 2020j andj 6.1j percentj inj
Aprilj 2021.j However,j thej unemploymentj ratej remainedj stablej fromj Marchj toj Aprilj 2021,j
implyingj thatj futurej jobj growthj mayj bej morej gradual.j Asj thej vaccinej rolloutj continues,j
schoolsj reopenj inj September,j peoplej returnj toj work,j andj thej economyj continuesj toj recover,j
thej unemploymentj ratej isj expectedj toj fall,j allowingj morej borrowersj toj exitj forbearancej andj
resumej fullj orj reducedj mortgagej payments.j Thej COVID-19j crisisj isj unlikej thej Greatj
Recessionj inj thatj homej pricej appreciationj hasj becomej anj asset,j andj unemploymentj hasj beenj
thej solej economicj disruptor.j Policymakersj canj ensurej thatj thej lossj mitigationj toolkitj takesj thisj
criticalj distinctionj intoj account.j Onej limitationj isj thej timej fromj determiningj thatj aj recessionj
existsj toj thej timej thej fedj canj implementj expansionaryj fiscalj policy.j
Thej governmentj implementedj programsj duringj thej greatj recession,j includej thej Economicj
Stimulusj Actj ofj 2008j andj thej Americanj Recoveryj andj Reinvestmentj Actj ofj 2009j orj ARRA.j
Thej recessionj beganj inj Decemberj ofj 2007,j andj thej Economicj Stimulusj Actj wasj signedj intoj
lawj onj Februaryj 13,j 2008.j Thisj wasj aj rapidj turnaroundj forj implementingj thisj fiscalj policy.j
Thej ARRAj wasj notj enactedj untilj 2009,j afterj itj wasj seenj thatj additionalj investmentj wasj
needed.Duringj thej greatj recession,j homej valuesj plummetedj byj 25j percentj fromj thej 2006j peakj
toj thej 2012j trough.j Duringj thej pandemic,j homej pricesj increasedj byj 11j percent.
Duringj thej greatj recession,j thej unemploymentj ratej rosej fromj 4.5j percentj toj 10j percentj byj thej
endj ofj thej recession.j Duringj thej pandemic,j thej unemploymentj ratej increasedj fromj 3.5j percentj
inj Februaryj 2020j toj 14.8j percentj inj Aprilj 2020,j beforej decliningj swiftlyj toj 6.9j percentj inj
Octoberj 2020j andj 6.1j percentj byj Aprilj 2021.j Thisj dataj isj summarizedj fromj (Nealj andj
Goodman,j 2021).j Duringj mostj recessions,j thej fiscalj policiesj thatj werej usedj werej thej
expansionaryj andj aj bitj ofj thej contractional.j Inj termsj ofj thej governmentj itj wasj expansionaryj
wherej moneyj wasj givenj inj stimulusj toj variousj sectorsj andj withinj householdj contractionary.j
Wherej stimulusj moneyj wasj givenj inj areasj suchj asj loansj andj interestj ratesj werej varying,j
independentj personnelj werej monitoringj theirj ownj spending.j Ij forj onej cutj backj onj myj
householdj spending,j myj extrasj andj allj duringj thej recession.j Inj 2008j Ij wasj workingj inj anj
industryj withj Realj Estate.j Manyj ofj usj lostj ourj jobsj andj Ij sawj thej writingj onj thej wallj beforej itj
happened.j Ij sawj peoplej takingj loansj withj incomej thatj forj surej didj notj match.j Theirj monthlyj
paymentsj andj revolvingj interestj ratej loansj werej wayj morej thanj theirj monthlyj incomej couldj
support.j Ij saidj toj myj oldj boss,j thisj isj goingj toj crashj andj burn.j Onej yearj laterj mostj ofj usj werej
unemployed.
Withj regardj toj thej currentj fiscalj climate,j Covidj definitelyj didj aj numberj onj ourj economyj andj
whatj isj nowj anotherj recession.j Havej wej beenj declaredj officialj yetj asj beingj inj aj recession?j Thej
pricej ofj everythingj isj high,j interestj ratesj arej high,j thej unemploymentj ratej isj high,j althoughj arej
theyj allj beingj counted?j Someonej can'tj collectj unemploymentj ifj theyj haven'tj workedj inj 2j
years.j Thej stimulusj moneyj createdj aj populationj ofj peoplej whoj don'tj wantj toj work.j Thej moneyj
shouldj havej beenj givenj toj thosej whoj lostj theirj jobs,j notj toj thosej whoj madej lessj thanj aj certainj
amount.j Ij sawj peoplej usingj thej moneyj forj shoppingj andj vacations.j Ij sawj peoplej usingj thej rentj
andj utilityj moratoriumsj asj anj excusej notj toj payj theirj billsj andj toj holdj onj toj moneyj evenj
thoughj theyj continuesj toj work.j Thej Covidj recessionj wasj aj ripplej effectj outj ofj illnessj andj fearj
ofj thej unknownj andj nowj folksj arej talkingj aboutj howj thingsj shouldj havej neverj beenj shutj downj
becausej ofj thej financialj impactj itj hasj hadj onj ourj economy.j Peoplej whoj workedj fromj homej
wantj toj continuej toj workj fromj homej inj theirj slippers.j Theyj wantj toj bej compensatedj forj
comingj backj in?j I'mj seeingj itj everyday.j Ij workedj atj myj workj locationj thej entirej time.j Therej
wasj noj sittingj atj home.j Whatj isj thej rightj andj wrongj answer?j Howj doesj everyonej feelj aboutj it?
Thej limitationsj ofj fiscalj policyj include:j borrowingj limitations,j budgetj requirements,j toj helpj
withj seriousj economicj hardship.j
Thej fiscalj policyj thatj hasj beenj usedj duringj thej previousj recessionj isj thej expansionaryj fiscalj
policy.j Thej expansionaryj fiscalj policyj influencesj thej government'sj economyj byj givingj taxj
breaksj andj increasingj thej government'sj spendingj ability.j Alsoj duringj thisj periodj thej
unemploymentj willj increasej andj aj decreasej inj income.j
Fiscalj policyj duringj thej COVID-19j recessionj differsj fromj normalj recessionsj becausej COVID-
19j createdj aj forcej recessionj (j orj isj creatingj aj forcedj recession)j duringj aj normalj recessionj isj itj
usuallyj thej mismanagementj ofj fundsj byj thej government.j Duringj thej COVID-19j recessionj
therej wasj aj $5.2j trillionj fiscalj policyj responsej toj thej pandemic.j Thej governmentj providedj thej
citizensj taxj breaks,j PPPj loans,j stimulusj paymentsj andj aj hostj ofj otherj breaksj duringj thej
COVID-19j recession!j Thej Hospitalsj tookj aj majorj hitj duringj thisj recession.
Duringj thej normalj recessionj thej USj governmentj decidedj toj goj withj aj strongerj spendingj policyj
toj combatj thej recessionj forj examplej thej 2008j recession.j Duringj thisj recessionj thej governmentj
decidedj toj utilizej taxj breakj cutsj toj helpj stimulatej thej economy.j Also,j duringj thisj recessionj
otherj industriesj werej hitj likej developmentj companies.j
Thej statesj havej limitedj optionsj forj dealingj withj aj severej budgetj crisisj orj recession.j Thesej
restrictionsj includej thej needj forj aj balancedj budget,j limitationsj onj borrowing,j andj aj lackj ofj
revenuej capacityj toj handlej significantj economicj disruptions.j Contrarily,j thej federalj
governmentj isj theoreticallyj exemptj fromj dealingj withj thesej restrictions.j However,j therej isj noj
agreementj onj whatj aj "balancedj budget"j requirementj entails.j Somej statesj havej exactj rulesj forj
whatj makesj aj balancedj budget,j whilej othersj doj not,j andj thej state'sj politicalj culturej influencesj
whetherj thej limitsj arej enforced.j Thej Unitedj Statesj isj currentlyj facingj monumentalj fiscalj
challengesj posedj byj thej economicj andj revenuej impactsj ofj thej coronavirusj pandemic.j Thej
COVID-19j crisisj isj veryj differentj fromj thej Greatj Recession;j homej pricej appreciationj hasj
becomej anj asset,j andj unemploymentj hasj beenj thej solej economicj disruptor.j Forj thej durationj ofj
aj recession,j thej governmentj mightj lowerj taxes,j orj raisej thej aggregatej demandj byj issuingj taxj
stimulusj rebates.j Duringj thej 2008j recession,j passedj aj $152j millionj stimulusj toj attemptj toj
offsetj thej recession.j Aj majorj disparityj inj fiscalj policyj duringj thej COVID-19j recessionj isj thej
amountj ofj governmentj spendingj inj thej healthj sector.j CMS.govj reportsj thatj federalj
governmentj spendingj onj healthj carej increasedj byj 36%j inj 2020.Anotherj majorj differencej isj
thej industriesj mostj affected.j Duringj thej Greatj Recession,j manufacturingj industriesj asj wellj asj
constructionj werej thej hardestj hit,j whilej onj thej otherj hand,j duringj COVID-19,j industriesj mostj
affectedj werej hospitalityj businesses.j Duringj previousj recessionaryj periodsj thej fiscalj policyj
thatj hasj beenj usedj isj thej expansionaryj fiscalj policy.j Thisj policyj allowsj thej governmentj toj
influencej economicj conditionsj byj providingj taxj cutsj andj increasingj governmentj spending.j Itj
alsoj includesj transferj paymentsj andj rebates.j Itj canj increasej discretionaryj governmentj
spending,j infusingj thej economyj withj morej throughj governmentj contracts.j Duringj aj recessionj
aggregatej demandj inj thej economyj fallsj whichj generallyj resultsj inj decreasedj employment,j
lowerj businessj revenue,j andj lowerj businessj investments.j Expansionaryj fiscalj policyj canj
increasej interestj rates,j growingj tradej deficit,j andj acceleratingj inflation.j COVID-19j isj veryj
differentj fromj normalj recessions.j Homej pricej appreciationj hasj becomej anj assetj andj
unemploymentj hasj beenj thej solej economicj disruptor.j Duringj thej recession,j constructionj andj
manufacturingj werej hitj thej hardestj wherej asj thoughj withj COVID-19j itj affectedj thej leisurej andj
hospitalityj industriesj tremendously.j Duringj COVID-19j millionsj ofj peoplej lostj theirj jobsj
whilej businessesj closedj andj somej neverj toj reopen.j Allj inj all,j aj recessionj isj totallyj differentj
fromj aj recessionj althoughj theyj havej similaritiesj Ij believej theyj havej strongj differencesj asj well.j
Covid-19j wasj somethingj thej worldj neverj experiencedj before.j
Nealj andj Goodman,j Mj andj Lj (2021).j Understandingj thej Differencesj betweenj thej COVID-19j
Recessionj andj Greatj Recessionj Canj Helpj Policymakersj Implementj Successfulj Lossj
Mitigation.https://www.urban.org/urban-wire/understanding-differences-between-covid-19-
recession-and-great-recession-can-help-policymakers-implement-successful-loss-mitigation
