2 Economists Say Intervention Helped Avert a 2nd Depression

[Pepsi]

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2 Economists Say Intervention Helped Avert a 2nd Depression

WASHINGTON — Like a mantra, officials from both the Bush and Obama administrations have trumpeted how the government’s sweeping interventions to prop up the economy since 2008 helped avert a second Depression.

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.

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.

http://www.nytimes.com/2010/07/28/business/economy/28bailout.html?_r=1

[Velleity]

I keep telling you all that there is only one economic model that even contemplates a liquidity trap. According to conservative models the condition we're in right now can't possibly exist. It follows that they have no prescription for remedying it.

"Conservatives" are going around squawking about austerity, as if they weren't the major cause of the vast majority of our debt and as if they have any viable solution to it.

Of course government spending preventing something much, much worse. There is no logical argument to the contrary, but since when would that stop "conservatives"?

[Pepsi]

there was a great graphic on how much of the current deficit is the result of Bush's 2 unfunded wars and his tax cuts.   Can't find it at the moment.   

[Velleity]

there was a great graphic on how much of the current deficit is the result of Bush's 2 unfunded wars and his tax cuts.   Can't find it at the moment.   

I don't know what it is now but I recall that something like a third of the deficit under Bush was attributable to the tax cuts for the rich. Of course we don't know what percentage of the deficit was attributable to the wars because Bush kept that out of the budget.

The irony here is that if we're going to cut spending to balance our budget then the place we're really going to need to cut is military spending. Do Republicans advocate that?

And of course they're still bullshitting us about cutting taxes and about how tax cuts for the rich don't cost us anything.