The Federal government responded to the deep recession of 2007–2009 by implementing highly expansionary fiscal policy. In 2008 the Federal government passed a tax rebate program that sent $600 dollar checks to qualified individuals.

Later that year, it created a $700 billion emergency fund to keep key financial institutions from failing. These and other programs increased the cyclically adjusted budget deficit from 21.2 percent of potential GDP in 2007 to 22.8 percent in 2008. When the economy continued to plunge, the Obama administration and Congress enacted a massive $787 billion stimulus program to be implemented over 2½ years. The cyclically adjusted budget deficit shot up from 22.8 percent of potential GDP in 2008 to 27.3 percent in 2009.