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Thee fiscale policye usede duringe previouse recessionarye periodse ise thee expansionarye fiscale
policy.e Thee expansionarye fiscale policye allowse thee governmente toe influencee economice
conditionse bye providinge taxe cutse ande increasinge discretionarye governmente spending.e Thee
governmente maye lowere taxe ratese ore increasee spendinge toe encouragee demande ande spure
economice activity.e Conversely,e toe combate inflation,e ite maye raisee ratese ore cute spendinge toe
coole downe thee economy,e ine whiche wee aree experiencinge ate thise momente withe currente inflation.
Withe COVID-19,e thee governmente hade itse “lessone learned”e frome thee paste recessione ine 2008e
ande beforee thee pandemice turmoile hite thee market,e thee Fede wase offeringe $100e billione ine
overnighte repoe ande $20e billione ine two-weeke repo.e Throughoute thee pandemic,e thee Fede
significantlye expandede thee programbothe ine thee amountse offerede ande thee lengthe ofe thee
loans.e Duringe thee pandemic,e unemploymente ratese weree note ase highe ase whene thee recessione
hit.e Alsoe thee housinge markete evene wente upe aboute 11%e ore soe duringe thee pandemic.e Whene thee
greate recessione hit,e thee housinge markete wente “downhill”e ase borrowerse coulde note keepe upe
withe paymentse ande theree wase note ase muche helpe frome thee governmente then,e soe manye loste
theire homese ore hade toe shorte selle ande note gete thee fulle equitye ore valuee ofe thee house.
Thee fiscale policye usede duringe previouse recessionarye periodse wase expansionary.e Thee
governmente cane influencee economice conditionse throughe taxe cutse ande increasede discretionarye
governmente spendinge undere ane expansionarye fiscale policy.e Duringe thee COVID-19e
pandemic,e mortgagee forbearancee providede enormouse reliefe toe homeowners.e However,e fore
manye borrowers,e ite wille comee toe ane ende ine thee cominge months,e ande whene ite does,e thee focuse
wille shifte toe thee adequacye ofe thee losse mitigatione toolkit.e Naturally,e industrye expertse wille looke
toe thee Greate Recessione fore guidancee ande lessonse learned.e Whene theye do,e ite ise criticale thate
theye understande thee differencese betweene thee twoe economice crises.e Looke ate homee pricee
appreciatione ande unemploymente ratese toe understande thee differencese betweene thee crises.e
Thesee twoe variablese aree importante ine explaininge mortgagee delinquenciese ande foreclosures:e
negativee equitye ande unemployment.e Thee unemploymente ratee rosee frome 4.5e percente ine
Decembere 2006e toe 10e percente ine Octobere 2009e duringe thee Greate Recession.e Thee recoverye
wase slow,e peakinge ate 6.9e percente ine 2013e ande fallinge toe 3.5e percente ine earlye 2020,e juste
beforee thee pandemic.e Thee COVID-19e unemploymente shock,e one thee othere hand,e wase muche
larger,e ande thee recoverye wase moree robust,e withe thee unemploymente ratee risinge frome 3.5e
percente ine Februarye 2020e toe 14.8e percente ine Aprile 2020,e thene rapidlye fallinge toe 6.9e percente
ine Octobere 2020e ande 6.1e percente ine Aprile 2021.e However,e thee unemploymente ratee remainede
stablee frome Marche toe Aprile 2021,e implyinge thate futuree jobe growthe maye bee moree gradual.e Ase
thee vaccinee rolloute continues,e schoolse reopene ine September,e peoplee returne toe work,e ande thee
economye continuese toe recover,e thee unemploymente ratee ise expectede toe fall,e allowinge moree
borrowerse toe exite forbearancee ande resumee fulle ore reducede mortgagee payments.e Thee COVID-
19e crisise ise unlikee thee Greate Recessione ine thate homee pricee appreciatione hase becomee ane asset,e
ande unemploymente hase beene thee solee economice disruptor.e Policymakerse cane ensuree thate thee
losse mitigatione toolkite takese thise criticale distinctione intoe account.e Onee limitatione ise thee timee
frome determininge thate ae recessione existse toe thee timee thee fede cane implemente expansionarye
fiscale policy.e
Thee governmente implementede programse duringe thee greate recession,e includee thee Economice
Stimuluse Acte ofe 2008e ande thee Americane Recoverye ande Reinvestmente Acte ofe 2009e ore ARRA.e
Thee recessione begane ine Decembere ofe 2007,e ande thee Economice Stimuluse Acte wase signede intoe
lawe one Februarye 13,e 2008.e Thise wase ae rapide turnarounde fore implementinge thise fiscale policy.e
Thee ARRAe wase note enactede untile 2009,e aftere ite wase seene thate additionale investmente wase
needed.Duringe thee greate recession,e homee valuese plummetede bye 25e percente frome thee 2006e
peake toe thee 2012e trough.e Duringe thee pandemic,e homee pricese increasede bye 11e percent.
Duringe thee greate recession,e thee unemploymente ratee rosee frome 4.5e percente toe 10e percente bye
thee ende ofe thee recession.e Duringe thee pandemic,e thee unemploymente ratee increasede frome 3.5e
percente ine Februarye 2020e toe 14.8e percente ine Aprile 2020,e beforee declininge swiftlye toe 6.9e
percente ine Octobere 2020e ande 6.1e percente bye Aprile 2021.e Thise datae ise summarizede frome
(Neale ande Goodman,e 2021).e Duringe moste recessions,e thee fiscale policiese thate weree usede weree
thee expansionarye ande ae bite ofe thee contractional.e Ine termse ofe thee governmente ite wase
expansionarye wheree moneye wase givene ine stimuluse toe variouse sectorse ande withine householde
contractionary.e Wheree stimuluse moneye wase givene ine arease suche ase loanse ande intereste ratese
weree varying,e independente personnele weree monitoringe theire owne spending.e Ie fore onee cute
backe one mye householde spending,e mye extrase ande alle duringe thee recession.e Ine 2008e Ie wase
workinge ine ane industrye withe Reale Estate.e Manye ofe use loste oure jobse ande Ie sawe thee writinge one
thee walle beforee ite happened.e Ie sawe peoplee takinge loanse withe incomee thate fore suree dide note
match.e Theire monthlye paymentse ande revolvinge intereste ratee loanse weree waye moree thane theire
monthlye incomee coulde support.e Ie saide toe mye olde boss,e thise ise goinge toe crashe ande burn.e Onee
yeare latere moste ofe use weree unemployed.
Withe regarde toe thee currente fiscale climate,e Covide definitelye dide ae numbere one oure economye
ande whate ise nowe anothere recession.e Havee wee beene declarede officiale yete ase beinge ine ae
recession?e Thee pricee ofe everythinge ise high,e intereste ratese aree high,e thee unemploymente ratee ise
high,e althoughe aree theye alle beinge counted?e Someonee can'te collecte unemploymente ife theye
haven'te workede ine 2e years.e Thee stimuluse moneye createde ae populatione ofe peoplee whoe don'te
wante toe work.e Thee moneye shoulde havee beene givene toe thosee whoe loste theire jobs,e note toe thosee
whoe madee lesse thane ae certaine amount.e Ie sawe peoplee usinge thee moneye fore shoppinge ande
vacations.e Ie sawe peoplee usinge thee rente ande utilitye moratoriumse ase ane excusee note toe paye theire
billse ande toe holde one toe moneye evene thoughe theye continuese toe work.e Thee Covide recessione
wase ae ripplee effecte oute ofe illnesse ande feare ofe thee unknowne ande nowe folkse aree talkinge aboute
howe thingse shoulde havee nevere beene shute downe becausee ofe thee financiale impacte ite hase hade one
oure economy.e Peoplee whoe workede frome homee wante toe continuee toe worke frome homee ine theire
slippers.e Theye wante toe bee compensatede fore cominge backe in?e I'me seeinge ite everyday.e Ie
workede ate mye worke locatione thee entiree time.e Theree wase noe sittinge ate home.e Whate ise thee righte
ande wronge answer?e Howe doese everyonee feele aboute it?
Thee limitationse ofe fiscale policye include:e borrowinge limitations,e budgete requirements,e toe helpe
withe seriouse economice hardship.e
Thee fiscale policye thate hase beene usede duringe thee previouse recessione ise thee expansionarye fiscale
policy.e Thee expansionarye fiscale policye influencese thee government'se economye bye givinge taxe
breakse ande increasinge thee government'se spendinge ability.e Alsoe duringe thise periode thee
unemploymente wille increasee ande ae decreasee ine income.e
Fiscale policye duringe thee COVID-19e recessione differse frome normale recessionse becausee
COVID-19e createde ae forcee recessione (e ore ise creatinge ae forcede recession)e duringe ae normale
recessione ise ite usuallye thee mismanagemente ofe fundse bye thee government.e Duringe thee COVID-
19e recessione theree wase ae $5.2e trillione fiscale policye responsee toe thee pandemic.e Thee
governmente providede thee citizense taxe breaks,e PPPe loans,e stimuluse paymentse ande ae hoste ofe
othere breakse duringe thee COVID-19e recession!e Thee Hospitalse tooke ae majore hite duringe thise
recession.
Duringe thee normale recessione thee USe governmente decidede toe goe withe ae strongere spendinge
policye toe combate thee recessione fore examplee thee 2008e recession.e Duringe thise recessione thee
governmente decidede toe utilizee taxe breake cutse toe helpe stimulatee thee economy.e Also,e duringe
thise recessione othere industriese weree hite likee developmente companies.e
Thee statese havee limitede optionse fore dealinge withe ae severee budgete crisise ore recession.e Thesee
restrictionse includee thee neede fore ae balancede budget,e limitationse one borrowing,e ande ae lacke ofe
revenuee capacitye toe handlee significante economice disruptions.e Contrarily,e thee federale
governmente ise theoreticallye exempte frome dealinge withe thesee restrictions.e However,e theree ise
noe agreemente one whate ae "balancede budget"e requiremente entails.e Somee statese havee exacte
rulese fore whate makese ae balancede budget,e whilee otherse doe not,e ande thee state'se politicale culturee
influencese whethere thee limitse aree enforced.e Thee Unitede Statese ise currentlye facinge
monumentale fiscale challengese posede bye thee economice ande revenuee impactse ofe thee
coronaviruse pandemic.e Thee COVID-19e crisise ise verye differente frome thee Greate Recession;e
homee pricee appreciatione hase becomee ane asset,e ande unemploymente hase beene thee solee
economice disruptor.e Fore thee duratione ofe ae recession,e thee governmente mighte lowere taxes,e ore
raisee thee aggregatee demande bye issuinge taxe stimuluse rebates.e Duringe thee 2008e recession,e
passede ae $152e millione stimuluse toe attempte toe offsete thee recession.e Ae majore disparitye ine fiscale
policye duringe thee COVID-19e recessione ise thee amounte ofe governmente spendinge ine thee healthe
sector.e CMS.gove reportse thate federale governmente spendinge one healthe caree increasede bye 36%e
ine 2020.Anothere majore differencee ise thee industriese moste affected.e Duringe thee Greate
Recession,e manufacturinge industriese ase welle ase constructione weree thee hardeste hit,e whilee one
thee othere hand,e duringe COVID-19,e industriese moste affectede weree hospitalitye businesses.e
Duringe previouse recessionarye periodse thee fiscale policye thate hase beene usede ise thee
expansionarye fiscale policy.e Thise policye allowse thee governmente toe influencee economice
conditionse bye providinge taxe cutse ande increasinge governmente spending.e Ite alsoe includese
transfere paymentse ande rebates.e Ite cane increasee discretionarye governmente spending,e infusinge
thee economye withe moree throughe governmente contracts.e Duringe ae recessione aggregatee
demande ine thee economye fallse whiche generallye resultse ine decreasede employment,e lowere
businesse revenue,e ande lowere businesse investments.e Expansionarye fiscale policye cane increasee
intereste rates,e growinge tradee deficit,e ande acceleratinge inflation.e COVID-19e ise verye differente
frome normale recessions.e Homee pricee appreciatione hase becomee ane assete ande unemploymente
hase beene thee solee economice disruptor.e Duringe thee recession,e constructione ande manufacturinge
weree hite thee hardeste wheree ase thoughe withe COVID-19e ite affectede thee leisuree ande hospitalitye
industriese tremendously.e Duringe COVID-19e millionse ofe peoplee loste theire jobse whilee
businessese closede ande somee nevere toe reopen.e Alle ine all,e ae recessione ise totallye differente frome
ae recessione althoughe theye havee similaritiese Ie believee theye havee stronge differencese ase well.e
Covid-19e wase somethinge thee worlde nevere experiencede before.e
Neale ande Goodman,e Me ande Le (2021).e Understandinge thee Differencese betweene thee COVID-
19e Recessione ande Greate Recessione Cane Helpe Policymakerse Implemente Successfule Losse
Mitigation.https://www.urban.org/urban-wire/understanding-differences-between-covid-19-
recession-and-great-recession-can-help-policymakers-implement-successful-loss-mitigation
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