August 19, 2010

DON'T LOOK NOW...:

Washington Saved Our Economic Hide (Froma Harrop, 8/19/10, Real Clear Politics)

Using econometric models, Alan Blinder and Mark Zandi argue that the bailouts, the stimulus and other extraordinary actions saved America from nothing less than another Great Depression. Blinder was vice chairman of the Federal Reserve. Zandi is chief economist at Moody's Analytics and advised Republican presidential candidate John McCain.

Had Washington not taken any aggressive steps starting in 2008, the results would have been horrific, their study says. Real gross domestic product would have fallen a "stunning" 12 percent, rather than the actual decline of 4 percent. Nearly 17 million jobs would have vanished, twice as many as the real count. And the unemployment rate would have peaked at 16.5 percent. [...]

One number the public does see and understandably dislikes is the federal budget deficit. Most assume that TARP and the various recession-fighting programs helped raise the deficit to $1.4 trillion in fiscal 2010. But how many have considered what that number might have been with no policy response? Blinder and Zandi have.

Recessions themselves fuel deficits by raising social spending and lowering tax revenues. Thus, government programs that make economic downturns shallower and end them sooner can pay for themselves.

If Washington had not reacted as quickly and as forcefully as it did, the two economists write, "the costs to U.S. taxpayers would have been vastly greater."

With no special government intervention, the 2010 deficit would have passed $2 trillion, according to their model. It would have reached $2.6 trillion in fiscal 2011 and $2.25 trillion in 2012.

Add outright deflation to the expected massive employment and falling GDP, Blinder and Zandi conclude, and "this dark scenario constitutes a 1930s-like depression."


...but there's an implicit argument here for W as our greatest president.

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Posted by Orrin Judd at August 19, 2010 12:10 AM
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