The Great Recession

I believe that the Obama administration’s response to the economic recession represented a departure from the conservative consensus. Obama’s administration allowed the federal government to play a more active role in the economy in order to try and lessen the crisis. President Obama highlighted this during his campaign, stating that the “government must play an active role in ending the financial crisis” (717). The administration’s actions after the campaign—I believe–held true to those statements. For example, the administration passed the “largest fiscal stimulus in American History,” funding infrastructure projects and government research programs (722). This is a divergence from central tenants of the conservative consensus, which advocated a faith in the markets. In response to Obama’s policies, the Tea Party grew momentum, expressing disdain for government programs that “gave away money to “freeloaders”” (722). Additionally, I think that this faith in the market was not a belief solely held by Republicans. Clinton believed that a semi-restricted “capital, left to its own devices, would flow to its best possible use and to the benefit of all” (591). 

I believe that the U.S. Treasury and the Federal Reserve hold such a significant degree of authority over economic policy-making because, historically, government officials and economic elites have been deeply invested in preserving the existing financial system rather than fundamentally altering it. Faced with recurring financial instability, these actors found it preferable to empower the Federal Reserve to “step in for the banks to keep the system alive” (726), rather than confront the more disruptive and politically challenging task of rethinking the core principles of consumption-driven growth and speculative investment that underlie the American economy. This decision reflects an unwillingness to engage with structural reforms that might threaten elite interests or require systemic shifts in how capital is distributed and accumulated. Thus, it became not only convenient but necessary for the Federal Reserve to evolve into the “primary dealer in money markets” (726), cementing its role as the central institution responsible for stabilizing and sustaining the financial architecture of the United States.