The Blinder-Zandi Report

A paper by economists Alan Blinder, an economist at Princeton and a former vice chairman of the Federal Reserve, and Mark Zandi, the chief economist at Moody’s Analytics, finds that without the Troubled Asset Relief Program (TARP) that bailed out the nation's financial sector, the bank stress tests, the emergency lending and asset purchases by the Federal Reserve, and the Obama Administration’s fiscal stimulus program - the much maligned American Recovery and Reinvestment Act of 2009 (ARRA) - the nation’s gross domestic product would be about 6.5 percent lower this year.

Additionally, Dr. Blinder and Dr. Zandi find that the US economy would have lost an additional 8.5 million jobs, on top of the more than 8 million lost so far; and the economy would be in the midst of a deflationary asset spiral, instead of low inflation. Overall, they conclude that the aggregate effects of the TARP and the ARRA "probably averted what could have been called Great Depression 2.0." I am not quite sure why economists apart from Paul Krugman always seem to forget about the Panic of 1873, a five-year long financial downturn marked by deflation, price instability and the first sustained period of mass unemployment in world history.

More on the Blinder-Zandi report from the New York Times:

Mr. Blinder and Mr. Zandi emphasize the sheer size of the fallout from the financial crisis. They estimate the total direct cost of the recession at $1.6 trillion, and the total budgetary cost, after adding in nearly $750 billion in lost revenue from the weaker economy, at $2.35 trillion, or about 16 percent of G.D.P.

By comparison, the savings and loan crisis cost about $350 billion in today’s dollars: $275 billion in direct cost and an additional $75 billion from the recession of 1990-91 — or about 6 percent of G.D.P. at the time.

But the new analysis might not be of immediate solace to officials in the Obama administration, who have been trying to promote the “summer of recovery” at events across the nation in the face of polls indicating persistent doubts about the impact of the $787 billion stimulus program.

For one thing, Mr. Blinder and Mr. Zandi find that the financial stabilization measures — the Troubled Asset Relief Program, as the bailout is known, along with the bank stress tests and the Fed’s actions — have had a relatively greater impact than the stimulus program.

If the fiscal stimulus alone had been enacted, and not the financial measures, they concluded, real G.D.P. would have fallen 5 percent last year, with 12 million jobs lost. But if only the financial measures had been enacted, and not the stimulus, real G.D.P. would have fallen nearly 4 percent, with 10 million jobs lost.

The combined effects of both sets of policies cannot be directly compared with the sum of each in isolation, they found, “because the policies tend to reinforce each other.”

Oddly enough, the New York Times failed to link to the report but here it is: How the Great Recession Was Brought to an End (pdf). The title is perhaps a bit over optimistic given that we are not quite out of the economic doldrums as yet but I do think their conclusion is inescapable:

It is clear that laissez faire was not an option; policymakers had to act. Not responding would have left both the economy and the government’s fiscal situation in far graver condition.

Still no one has ever won an election with the argument that it could have been worse. 

The Blinder-Zandi Report

A paper by economists Alan Blinder, an economist at Princeton and a former vice chairman of the Federal Reserve, and Mark Zandi, the chief economist at Moody’s Analytics, finds that without the Troubled Asset Relief Program (TARP) that bailed out the nation's financial sector, the bank stress tests, the emergency lending and asset purchases by the Federal Reserve, and the Obama Administration’s fiscal stimulus program - the much maligned American Recovery and Reinvestment Act of 2009 (ARRA) - the nation’s gross domestic product would be about 6.5 percent lower this year.

Additionally, Dr. Blinder and Dr. Zandi find that the US economy would have lost an additional 8.5 million jobs, on top of the more than 8 million lost so far; and the economy would be in the midst of a deflationary asset spiral, instead of low inflation. Overall, they conclude that the aggregate effects of the TARP and the ARRA "probably averted what could have been called Great Depression 2.0." I am not quite sure why economists apart from Paul Krugman always seem to forget about the Panic of 1873, a five-year long financial downturn marked by deflation, price instability and the first sustained period of mass unemployment in world history.

More on the Blinder-Zandi report from the New York Times:

Mr. Blinder and Mr. Zandi emphasize the sheer size of the fallout from the financial crisis. They estimate the total direct cost of the recession at $1.6 trillion, and the total budgetary cost, after adding in nearly $750 billion in lost revenue from the weaker economy, at $2.35 trillion, or about 16 percent of G.D.P.

By comparison, the savings and loan crisis cost about $350 billion in today’s dollars: $275 billion in direct cost and an additional $75 billion from the recession of 1990-91 — or about 6 percent of G.D.P. at the time.

But the new analysis might not be of immediate solace to officials in the Obama administration, who have been trying to promote the “summer of recovery” at events across the nation in the face of polls indicating persistent doubts about the impact of the $787 billion stimulus program.

For one thing, Mr. Blinder and Mr. Zandi find that the financial stabilization measures — the Troubled Asset Relief Program, as the bailout is known, along with the bank stress tests and the Fed’s actions — have had a relatively greater impact than the stimulus program.

If the fiscal stimulus alone had been enacted, and not the financial measures, they concluded, real G.D.P. would have fallen 5 percent last year, with 12 million jobs lost. But if only the financial measures had been enacted, and not the stimulus, real G.D.P. would have fallen nearly 4 percent, with 10 million jobs lost.

The combined effects of both sets of policies cannot be directly compared with the sum of each in isolation, they found, “because the policies tend to reinforce each other.”

Oddly enough, the New York Times failed to link to the report but here it is: How the Great Recession Was Brought to an End (pdf). The title is perhaps a bit over optimistic given that we are not quite out of the economic doldrums as yet but I do think their conclusion is inescapable:

It is clear that laissez faire was not an option; policymakers had to act. Not responding would have left both the economy and the government’s fiscal situation in far graver condition.

Still no one has ever won an election with the argument that it could have been worse. 

The Blinder-Zandi Report

A paper by economists Alan Blinder, an economist at Princeton and a former vice chairman of the Federal Reserve, and Mark Zandi, the chief economist at Moody’s Analytics, finds that without the Troubled Asset Relief Program (TARP) that bailed out the nation's financial sector, the bank stress tests, the emergency lending and asset purchases by the Federal Reserve, and the Obama Administration’s fiscal stimulus program - the much maligned American Recovery and Reinvestment Act of 2009 (ARRA) - the nation’s gross domestic product would be about 6.5 percent lower this year.

Additionally, Dr. Blinder and Dr. Zandi find that the US economy would have lost an additional 8.5 million jobs, on top of the more than 8 million lost so far; and the economy would be in the midst of a deflationary asset spiral, instead of low inflation. Overall, they conclude that the aggregate effects of the TARP and the ARRA "probably averted what could have been called Great Depression 2.0." I am not quite sure why economists apart from Paul Krugman always seem to forget about the Panic of 1873, a five-year long financial downturn marked by deflation, price instability and the first sustained period of mass unemployment in world history.

More on the Blinder-Zandi report from the New York Times:

Mr. Blinder and Mr. Zandi emphasize the sheer size of the fallout from the financial crisis. They estimate the total direct cost of the recession at $1.6 trillion, and the total budgetary cost, after adding in nearly $750 billion in lost revenue from the weaker economy, at $2.35 trillion, or about 16 percent of G.D.P.

By comparison, the savings and loan crisis cost about $350 billion in today’s dollars: $275 billion in direct cost and an additional $75 billion from the recession of 1990-91 — or about 6 percent of G.D.P. at the time.

But the new analysis might not be of immediate solace to officials in the Obama administration, who have been trying to promote the “summer of recovery” at events across the nation in the face of polls indicating persistent doubts about the impact of the $787 billion stimulus program.

For one thing, Mr. Blinder and Mr. Zandi find that the financial stabilization measures — the Troubled Asset Relief Program, as the bailout is known, along with the bank stress tests and the Fed’s actions — have had a relatively greater impact than the stimulus program.

If the fiscal stimulus alone had been enacted, and not the financial measures, they concluded, real G.D.P. would have fallen 5 percent last year, with 12 million jobs lost. But if only the financial measures had been enacted, and not the stimulus, real G.D.P. would have fallen nearly 4 percent, with 10 million jobs lost.

The combined effects of both sets of policies cannot be directly compared with the sum of each in isolation, they found, “because the policies tend to reinforce each other.”

Oddly enough, the New York Times failed to link to the report but here it is: How the Great Recession Was Brought to an End (pdf). The title is perhaps a bit over optimistic given that we are not quite out of the economic doldrums as yet but I do think their conclusion is inescapable:

It is clear that laissez faire was not an option; policymakers had to act. Not responding would have left both the economy and the government’s fiscal situation in far graver condition.

Still no one has ever won an election with the argument that it could have been worse. 

The Blinder-Zandi Report

A paper by economists Alan Blinder, an economist at Princeton and a former vice chairman of the Federal Reserve, and Mark Zandi, the chief economist at Moody’s Analytics, finds that without the Troubled Asset Relief Program (TARP) that bailed out the nation's financial sector, the bank stress tests, the emergency lending and asset purchases by the Federal Reserve, and the Obama Administration’s fiscal stimulus program - the much maligned American Recovery and Reinvestment Act of 2009 (ARRA) - the nation’s gross domestic product would be about 6.5 percent lower this year.

Additionally, Dr. Blinder and Dr. Zandi find that the US economy would have lost an additional 8.5 million jobs, on top of the more than 8 million lost so far; and the economy would be in the midst of a deflationary asset spiral, instead of low inflation. Overall, they conclude that the aggregate effects of the TARP and the ARRA "probably averted what could have been called Great Depression 2.0." I am not quite sure why economists apart from Paul Krugman always seem to forget about the Panic of 1873, a five-year long financial downturn marked by deflation, price instability and the first sustained period of mass unemployment in world history.

More on the Blinder-Zandi report from the New York Times:

Mr. Blinder and Mr. Zandi emphasize the sheer size of the fallout from the financial crisis. They estimate the total direct cost of the recession at $1.6 trillion, and the total budgetary cost, after adding in nearly $750 billion in lost revenue from the weaker economy, at $2.35 trillion, or about 16 percent of G.D.P.

By comparison, the savings and loan crisis cost about $350 billion in today’s dollars: $275 billion in direct cost and an additional $75 billion from the recession of 1990-91 — or about 6 percent of G.D.P. at the time.

But the new analysis might not be of immediate solace to officials in the Obama administration, who have been trying to promote the “summer of recovery” at events across the nation in the face of polls indicating persistent doubts about the impact of the $787 billion stimulus program.

For one thing, Mr. Blinder and Mr. Zandi find that the financial stabilization measures — the Troubled Asset Relief Program, as the bailout is known, along with the bank stress tests and the Fed’s actions — have had a relatively greater impact than the stimulus program.

If the fiscal stimulus alone had been enacted, and not the financial measures, they concluded, real G.D.P. would have fallen 5 percent last year, with 12 million jobs lost. But if only the financial measures had been enacted, and not the stimulus, real G.D.P. would have fallen nearly 4 percent, with 10 million jobs lost.

The combined effects of both sets of policies cannot be directly compared with the sum of each in isolation, they found, “because the policies tend to reinforce each other.”

Oddly enough, the New York Times failed to link to the report but here it is: How the Great Recession Was Brought to an End (pdf). The title is perhaps a bit over optimistic given that we are not quite out of the economic doldrums as yet but I do think their conclusion is inescapable:

It is clear that laissez faire was not an option; policymakers had to act. Not responding would have left both the economy and the government’s fiscal situation in far graver condition.

Still no one has ever won an election with the argument that it could have been worse. 

The stimulus was the biggest middle-class tax cut in history

I was disappointed by some compromises made to pass the stimulus (the American Recovery and Reinvestment Act) in February 2009. I felt President Obama made too many concessions in the fruitless pursuit of Republican votes, and that too much of the cost went toward tax cuts that would be slower-acting and less stimulative than certain forms of government spending.

That said, the tax cuts in the stimulus will help tens of millions of American families, particularly those with working-class or middle-class incomes. Citizens for Tax Justice has calculated that "the major tax cuts enacted in the 2009 economic stimulus bill actually reduced federal income taxes for tax year 2009 for 98 percent of all working families and individuals." In terms of the number of Americans who benefited, the stimulus bill was the biggest tax cut in history.

In addition, "the estimated $282 billion in tax cuts [from the stimulus] over two years is more than either of the 2001-2002 or the 2004-2005 Bush tax cuts or the Kennedy or Reagan tax cuts." George W. Bush's tax cuts were more costly to the U.S. Treasury over a 10-year period, but as Anonymous Liberal noted last year,

The Bush tax cuts were skewed dramatically toward the wealthy. In 2004, 60% of the tax cuts went to the top 20 percent of income earners with over 25% going to the top 1% of income earners. Those numbers have increased since then as the cuts to the estate tax have taken effect.

Tomorrow is the deadline for most Americans to file their tax returns, and Republicans will try to harness the tea party movement's anger at what they view as excessive taxes and spending. However, many ordinary people may be shocked to learn how large their refunds are this year. According to the White House, "the average tax refund is up nearly 10 percent this year."

Democrats should not be afraid to vigorously defend the stimulus bill during this year's Congressional campaigns. I wish the recovery act had been larger and better targeted, but the bottom line is that Republicans voted against the largest ever middle-class tax cut.

The White House website has this Recovery Act Tax Savings Tool to help people find benefits to which they are entitled. The White House press office released this fact sheet with much more detailed information on April 12. Note: if you have already filed your taxes, you can amend them after April 15 to collect on any credits from the stimulus bill that you missed.

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