Given the size and importance of its economy, the United States is certainly worthy of study in the context of austerity. In much of the postwar period, and even before, the behaviour of the US economy has shown evidence of the power of fiscal policy, as is documented in Romer and Romer (2010), for example.

American fiscal policy in response to the financial crisis of 2007–08 was initially highly expansionary. When Barack Obama assumed the presidency on 20 January 2009, the budget deficit was huge, approaching 10 per cent of GDP, output was falling, unemployment was soaring (it reached 10.5 per cent) and confidence was at rock bottom. It seemed that economic stimulus was needed. And this was what Obama delivered. On 17 February, less than a month after taking office, he signed into law the American Recovery and Reinvestment Act (ARRA), which provided a stimulus with a headline value of $820 billion, although the actual value was more like $725 billion (see, e.g., Tooze 2018: 279). This was of the order of 5 to 6 per cent of GDP. Part of the stimulus package went into tax cuts, and part into improving programmes such as Medicaid and unemployment relief. The remainder went into discretionary spending, including green energy and improvements to broadband. There was considerable spending on infrastructure items such as roads and bridges.

The consensus of the research done on the impact of the ARRA (see, e.g., Conley & Dupor 2013) was that it was expansionary. It is not easy to estimate the effects of such a policy as one does not know what would have happened had the Act not been passed. Nevertheless, Conley and Dupor estimate that the programme, in its first 24 months, increased government employment by between 156,000 and 563,000 persons. The effect on the private sector was somewhere between a loss of 182,000 jobs to a gain of 1.1 million jobs. The total number of jobs was estimated to have risen by between 82,000 and 1.55 million. This is of course a frustratingly wide range. However, these figures fall considerably short of those made by the Council of Economic Advisors, who estimated job creation of 1.6 million a year for four years.