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Who Takes Credit?
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Chief among those other forces were the interest rate cuts initiated by the Federal Reserve beginning in January 2001 that have brought bank interest rates to their lowest level in 40 years. As a consequence, mortgage interest rates are at their lowest level in 30 years, and automobile loan interest rates are also at record lows, not to mention low credit card interest rates. These low rates have stimulated an unprecidented house, car, furniture, appliance, and gadget purchasing boom that has benefitted every segment of the economy.
Also contributing to the economic recovery was increased government spending. Military, homeland security, education, and health care expenditures have soared. Overall, government spending grew 20% from $1.79 trillion in 2000 to $2.16 trillion in 2003. This $370 billion increase in spending surpasses the President's nearly $250 billion tax cuts. This increased spending has permeated the country, stimulating every sector of the economy.
The slumping value of the dollar has also contributed to the economic recovery. The dollar lost over 20% of its value over the past year, the biggest drop in over a decade. This has made US exports 20% cheaper abroad and imports 20% less competitive in the US, and given the manufacturing sector a much needed boost.
Lastly, the economic recovery may have just been the normal course of an economic cycle. Up until the 20th century the economy always recovered from a downturn without government intervention, usually within a year or two. Beginning with the Great Depression in the 1930's, the government began to intervene in the economy during economic downturns, but even economists disagree over how much of an effect government intervention has actually had. Economists do agree that the economy would have recovered eventually without government intervention.
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