Economic Growth and Stimulus


During an economic downturn policymakers may choose to enact policies to stimulate the economy, encourage job creation, and provide relief to those in need. For example, in response to the Great Recession, Congress enacted the American Recovery and Reinvestment Act of 2009. It contained $787 billion in tax reductions, infrastructure spending, expansions in unemployment insurance, aid to the states (predominantly through the Medicaid program), and other provisions.

Among the challenges for policymakers are decisions about the appropriate magnitude, targeting, and duration of economic stimulus. To make an impact, the size of the stimulus should be commensurate with the depth of the problem and should focus on the most deficient areas of the economy. Such policies should allow sufficient time for the private sector to regain its footing. Above all, size, targeting, and duration should be based on the best available objective economic analysis, rather than on emotional reactions.

On the other hand stimulative policies have potential pitfalls, particularly if they are extended for too long. They increase the deficit and national debt. This issue is particularly sensitive in the case of large preexisting deficits. Over the longer term, these policies may lead to economic inefficiency, higher inflation, and slower economic growth.

The Great Recession has been unprecedented in the postwar period in its persistence and in the slowness of the nation’s economic recovery. It required an “all hands on deck” approach. Policymakers used both fiscal and monetary policy tools to stave off possible economic collapse. In fact, the Federal Reserve continues maintained its stimulative policy of historically low interest rates through 2016, with only one small increase in interest rates over the period.

The results have been mixed, however. In the last several years many objective economic indicators, such as those related to unemployment, have shown a marked improvement. Yet to this day, many middle- and lower-income people in this country do not feel that they fully participate in the ongoing economic recovery.

This calls for a flexible interpretation of the generally sound principle that stimulus and relief during economic crises should be temporary. Due to the depth of this recession, stimulus could apply for much longer than in past cases to help put the economy back on track and to mitigate the suffering of vulnerable populations such as the long-term unemployed (who are disproportionately older workers).

Alternatively, it may suggest that policymakers should consider deeper economic reforms to address the issues that continue to persist almost a decade after the financial crisis. Merely continuing on the pre-2008 path may be not enough to address economic concerns of the broad spectrum of middle- and lower-income people

Economic Growth and Stimulus: Policy

Stimulus criteria

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Proposals to stimulate the economy should be evaluated according to the timeliness with which they can be implemented, the degree to which they are likely to boost the economy, the likely consequences of inaction, and their effect on the long-term debt. Preference should be given to those expenditures that boost the economy to the greatest extent, are temporary and with a short implementation lag, accelerate the timing of investments with great benefits to society, create or preserve jobs in the near term, or promote well-targeted relief programs that help those most in need.

Relief criteria

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Proposals to provide relief to people facing hardships due to economic downturns should be temporary and well targeted. Preference should be given to measures that also would be stimulative.


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Increasing economic growth and meeting labor demand in the context of an aging society require an ever-increasing number of people. AARP recognizes that immigration is an important ongoing source of new Americans and helps sustain the intergenerational partnership upon which the well-being of our society is based. As an organization with a commitment to diversity, strengthened communities, and positive social change, we recognize the importance of the current immigration debate and its impact on the current and future population age 50 and older. While there are many views on the future of immigration in this country, there is no disagreement that America has a long and rich history of immigrants contributing to the economic, social, and cultural foundation of our nation. Our nation remains grounded on the belief in achieving the American Dream.

The debate is an important opportunity to balance our history of immigration; our American values of fairness, justice, and freedom; and our needs as a nation to promote a sound economy and an open society. Our priority in immigration reform will be to contribute to a constructive debate that has positive outcomes for all older Americans, regardless of country of origin, and to help ensure that immigration reform will sustain the economic and health security of older Americans.