The economic downturn under way is likely to be the worst since World War II. Its impact on many older Americans could be devastating. This Insight on the Issues explains the effects of the crisis on the U.S. economy and older Americans. It also addresses the question of what government policies should be adopted to mitigate the effects of recession and financial turmoil and to prevent any reoccurrence. The appendix, which is somewhat more technical than the rest of the paper, addresses the origins of the crisis and its impact on the financial system.
The paper recommends that the federal government focus its efforts on reviving the economy and unblocking the credit channel. To assist the vulnerable and poor, be they young or old, the government should include in its stimulus program such measures as further extending unemployment benefits, increasing nutrition benefits, and increasing matching funds to the states to forestall cuts in Medicaid and other social programs. Another potentially important measure is a program to implement a streamlined form of mortgage relief. (18 pages)