I never had any doubts that the federal government’s financial bailout and the stimulus bill were needed to weather the economic storm that hit us in 2008. Many people disagreed, but as the New York Times reported this week:
Now, two leading economists wielding complex quantitative models say that assertion can be empirically proved.
In a new paper, the economists argue that without the Wall Street bailout, the bank stress tests, the emergency lending and asset purchases by the Federal Reserve, and the Obama administration’s fiscal stimulus program, the nation’s gross domestic product would be about 6.5 percent lower this year.
In addition, there would be about 8.5 million fewer jobs, on top of the more than 8 million already lost; and the economy would be experiencing deflation, instead of low inflation.
The paper, by Alan S. Blinder, a Princeton professor and former vice chairman of the Fed, and Mark Zandi, chief economist at Moody’s Analytics, represents a first stab at comprehensively estimating the effects of the economic policy responses of the last few years.
“While the effectiveness of any individual element certainly can be debated, there is little doubt that in total, the policy response was highly effective,” they write.
That’s right. If those who wanted our government to act like some dumbass tightwad had gotten their way, we would be in a depression now instead of working our way out of a recession.
I was one, and still am one that thinks the stimulus bill wasn’t big enough. More government spending on much needed infrastructure projects would help create jobs, which would in turn create demand for goods and services, resulting in more economic growth. Obama requested just enough stimulus money to weather the storm, but the storm has not passed, and he needs to ask for more to pull us out of this mess, but he won’t in this highly partisan environment, especially in a mid-term election year.