Mercury Rising 鳯女

Politics, life, and other things that matter

It really could be worse

Posted by Charles II on July 29, 2010

It’s cold comfort to hear that things could be worse. But it’s the truth, as a recent analysis by Blinder and Zandi makes clear (via Calculated Risk):

The U.S. economy has made enormous progress since the dark days of early 2009. Eighteen months ago, the global financial system was on the brink of collapse and the U.S. was suffering its worst economic downturn since the 1930s. Real GDP was falling at about a 6% annual rate, and monthly job losses averaged close to 750,000. Today, the financial system is operating much more normally, real GDP is advancing at a nearly 3% pace, and job growth has resumed, albeit at an insufficient pace…The Great Recession gave way to recovery as quickly as it did largely because of the unprecedented responses by monetary and fiscal policymakers.

The Troubled Asset Relief Program was controversial from its inception. Both the program’s $700 billion headline price tag and its goal of “bailing out” financial institutions—including some of the same institutions that triggered the panic in the first place—were hard for citizens and legislators to swallow. To this day, many believe the TARP was a costly failure. In fact, TARP has been a substantial success… Its ultimate cost to taxpayers will be a small fraction of the headline $700 billion figure: A number below $100 billion seems more likely to us…

Criticism of the ARRA [Stimulus bill] has also been strident, focusing on the high price tag, the slow speed of delivery, and the fact that the unemployment rate rose much higher than the Administration predicted in January 2009….Critics who argue that the ARRA failed because it did not keep unemployment below 8% ignore the facts that (a) unemployment was already above 8% when the ARRA was passed and (b) most private forecasters (including Moody’s Analytics) misjudged how serious the downturn would be…Without such a determined and aggressive response by policymakers, the economy would likely have fallen into a much deeper slump.

In the scenario that excludes all the extraordinary policies, the downturn continues into 2011. Real GDP falls a stunning 7.4% in 2009 and another 3.7% in 2010 (see Table 3). The peak-to-trough decline in GDP is therefore close to 12%, compared to an actual decline of about 4%. By the time employment hits bottom, some 16.6 million jobs are lost in this scenario—about twice as many as actually were lost. The unemployment rate peaks at 16.5%, and although not determined in this analysis, it would not be surprising if the underemployment rate approached one-fourth of the labor force. The federal budget deficit surges to over $2 trillion in fiscal year 2010, $2.6 trillion in fiscal year 2011, and $2.25 trillion in FY 2012. Remember, this is with no policy response. [emphasis added]

It’s ironic that the current election will hinge on whether voters will re-install the people who wanted the crisis to become much worse. It must suck to be a Republican…to realize that you exist to impoverish your nation, harm your community, and leave a legacy of ruin and destruction.

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2 Responses to “It really could be worse”

  1. Stormcrow said

    It’s ironic that the current election will hinge on whether voters will re-install the people who wanted the crisis to become much worse.

    Don’t worry, it won’t.

    It’ll hinge on hot-button non-issues and ginned-up media feeding frenzies, as usual.

    It must suck to be a Republican…to realize that you exist to impoverish your nation, harm your community, and leave a legacy of ruin and destruction.

    No, these people live on a diet of 100% pure doublethink.

    But I think they’re going to find November a pleasanter surprise than we will. Thanks to the evident failure of Barack Obama’s administration to even hold the line on the shredding of the Bill of Rights that the Bush regime put into high gear.

    The war in Afghanistan isn’t going to help either, since Obama has adopted that failed adventure and made it his own. Much the same way that Johnson adopted the Vietnam War.

    Remember what happened to Johnson? And his would-be successor, Hubert Humphrey?

  2. Charles II said

    Stormcrow asks, “Remember what happened to Johnson? And his would-be successor, Hubert Humphrey?”

    Alas, I do. And we thought at the time that it was for the good of the country, that the Dems would at last realize they needed to get back to being the people’s party.

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