The U.S. recession was declared to have ended during the second quarter of 2009, but when will we start to really see unemployment decline and full-time jobs created? According to an article in the September 18th edition of The Economist, recoveries after financial crises are usually slow as the banking system is repaired and institutions rebuild their balance sheets by reducing debt. This debt reduction period lasts around seven years, which would have the U.S. emerge from the recession hangover in 2014.
If we are to fully recover from the recession during 2014, then it would make sense to maintain loose fiscal policy through the end of 2013. This loose fiscal policy would consist of extending all of the Bush tax cuts until 2013. Increasing taxes while the economy is limping along is a good start to pushing the U.S. back into a recession.
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