The next decade would not, however, be anywhere near as kind or
prosperous as the 1990s.
Shortly after George Walker Bush took office in 2001,
the US economy would fall into recession while by year's end America
would be hit by a 9/11 terrorist attack that would catapult
the country into two expensive wars in Iraq and Afghanistan.
In that same year of 2001, China joined the World Trade Organization and
began flooding America with illegally subsidized exports.
Over the next ten years, the US would shut down over 50,000 factories,
lose more than five million manufacturing jobs, and see its historical annual rate
of GDP growth cut by a full two-thirds.
On top of two wars and a burgeoning trade deficit, the US economy would also
be hit in 2007 with a massive collapse of a housing bubble and
soon find itself in the worst recession since the Great Depression of the 1930s.
To pull the nation out of recession and slow growth, the White House and
Congress would orchestrate the biggest fiscal stimulus in history.
While the Federal Reserve would use new monetary policy tools like
quantitative easing to likewise break the record for a huge monetary stimulus.
All these fiscal and monetary stimuli would be to little avail, however.
And in the 2010s, macroeconomists would once again find themselves in
a rapidly changing global economy where traditional fiscal and
monetary policy solutions were no longer working very well, and
where countries around the globe faced deeper seated structural issues,
seemingly resistant to Keynesian solutions.