Spending and Working One's Way out of a Recession - US Tax Policy in the Aftermath of the Great Recession

I study two of the tax relief measures enacted by the first Obama administration in the aftermath of the Great Recession. I find that a cut in the payroll tax levied on earned income considerably increased working households' consumption spending. In contrast, I failed to find any positive impact of the targeted expansions in the child tax credit and the earned income tax credit programs on labor supply of intended beneficiaries. These findings shed new light on the relative efficacy of commonly used tax relief measures during a weak economy.