Progressives have lots of good reasons to wish that President Obama and the 2009-10 Congress has taken an even more aggressive approach in responding to the Great Recession. More stimulus spending and a more aggressive push to reform giant financial institutions would have undoubtedly have helped things get better faster — especially in places like North Carolina.
That said, for all the imperfections of their approach, it’s absolutely clear that the economy is much better off today than it would have been without it (and exponentially better off than it would have been had the U.S. followed the do-nothing, “cuts first” approach promoted by conservatives). For confirmation of this reality check out this new report from two of the nation’s top economists. Their central finding: the federal government’s responses were a resounding success.
Bob Greenstein of the Center on Budget and Policy Priorities summarized their findings in this recent post:
In a major new paper for CBPP’s Policy Futures initiative, Alan Blinder, former Federal Reserve Vice Chairman, and Mark Zandi, chief economist of Moody’s Analytics, explain that “the massive and multifaceted policy responses to the financial crisis and Great Recession — ranging from traditional fiscal stimulus to tools that policymakers invented on the fly — dramatically reduced the severity and length of the meltdown that began in 2008; its effects on jobs, unemployment, and budget deficits; and its lasting impact on today’s economy.”
Without the policy responses of late 2008 and early 2009, Blinder and Zandi estimate that:
- The peak-to-trough decline in real gross domestic product (GDP), which was barely over 4 percent, would have been close to a stunning 14 percent.
- The economy would have contracted for more than three years, more than twice as long as it did.
- More than 17 million jobs would have been lost, about twice the actual number.
- Unemployment would have peaked at just under 16 percent, rather than the actual 10 percent.
- The budget deficit would have grown to more than 20 percent of GDP, about double its actual peak of 10 percent, topping off at $2.8 trillion in fiscal 2011.
- Today’s economy would be far weaker than it is — with real GDP in the second quarter of 2015 about $800 billion lower than its actual level, 3.6 million fewer jobs, and unemployment at a still-dizzying 7.6 percent.
This landmark paper is especially important because Read more