Now, this is when the crisis spread from Wall Street to Main Street. After all, the ability to get a loan is how you finance the purchase of everything from a home to a car to, as you all know very well, a college education. It’s how stores stock their shelves, and farms buy equipment, and businesses make payroll. So when banks stopped lending money, businesses started laying off workers. When laid-off workers had less money to spend, businesses were forced to lay off even more workers. When people couldn’t get a car loan, a bad situation at the auto companies became even worse. When people couldn’t get home loans, the crisis in the housing market only deepened. Because the infected securities were being traded worldwide and other nations also had weak regulations, this recession soon became global. And when other nations can’t afford to buy our goods, it slows our economy even further.
So this is the situation, the downward spiral that we confronted on the day that we took office. So our most urgent task has been to clear away the wreckage, repair the immediate damage to the economy, and do everything we can to prevent a larger collapse. And since the problems we face are all working off each other to feed a vicious economic downturn, we’ve had no choice but to attack all fronts of our economic crisis simultaneously.
The first step was to fight a severe shortage of demand in the economy. So the Federal Reserve did this by dramatically lowering interest rates last year in order to boost investment. My administration and Congress boosted demand by passing the largest recovery plan in our nation’s history. It’s a plan that’s already in the process of saving or creating 3.5 million jobs over the next two years. It’s putting money directly into people’s pockets with a tax cut for 95 percent of working families that’s now showing up in paychecks across America. And to cushion the blow of this recession, we also provided extended unemployment benefits and continued health care coverage to Americans who’ve lost their jobs through no fault of their own.
Now, you will recall that some argued this recovery plan is a case of irresponsible government spending, that it’s somehow to blame for our long-term deficit projections, and that the federal government should be cutting instead of increasing spending right now. So I want to tackle this argument head on.
To begin with, economists on both the left and the right agree that the last thing a government should do in the middle of a recession is to cut back on spending. You see, when this recession began, many families sat around the kitchen table and tried to figure out where they could cut back. And so have many businesses. And this is a completely reasonable and understandable reaction. But if everybody — if everybody — if every family in America, if every business in America cuts back all at once, then no one is spending any money, which means there are no customers, which means there are more layoffs, which means the economy gets even worse. That’s why the government has to step in and temporarily boost spending in order to stimulate demand. That’s exactly what we’re doing right now.