Two well-respected economists recently issued a report arguing that the recession would have been much worse had it not been for the actions and interventions of the federal government. N.C. State University economist Mike Walden explains what the report says about how bad it could have been.
“These are two well-respected economists: One works for a major economic forecasting firm; the other is in academia but actually used to be a member of the Federal Reserve Board. So these folks, when they talk, people do listen and take notice.
“They issued a report — a joint report — that said if the federal government (and by federal government, I mean not just the spending by the Congress and the president but also what the Federal Reserve has done, so I am lumping those two together under the term federal government.) If the federal government had not done what it has done over the last two years in terms of additional spending, additional money creation, et cetera, they estimate that the recession that we experienced would have been twice as bad.
“So, for example, instead of losing 8 million jobs nationally, we would have lost 16 million jobs. They argue the official unemployment rate would have hit 16 percent. Nationally it peaked out about 10 percent. And they argued that a broader rate of … a broader measure of unemployment, which includes people who are working part-time only because they can’t find full time work, would have hit 25 percent.
“The economists also estimate that the ultimate cost of the government intervention — once you account, for example, the fact that many of the loans made to banks and others — will be paid back in … ultimately going to be $1.5 trillion.
“And so one has to look at this — of course, there are economists who will disagree about the assumptions made in this forecast. But this is a concrete estimation of, alright, if we hadn’t done what was done in the past couple of years exactly how bad could it have been?”