Froma Harrop draws attention to Alan Binder and Mark Zandi. Binder is the Vice Chairman of the Federal Reserve. Zandi is chief analyst for Moody's and also advised John McCain's presidential campaign. They argue that TARP and the stimulus worked.
Had Washington not taken any aggressive steps starting in 2008, the results would have been horrific, their study says. Real gross domestic product would have fallen a "stunning" 12 percent, rather than the actual decline of 4 percent.
Nearly 17 million jobs would have vanished, twice as many as the real count. And the unemployment rate would have peaked at 16.5 percent.
Think the deficit is bad now? Try imagining what it would be with 16 percent unemployment.
Of course the stimulus bill worked. That's what stimulus bills do--they "stimulate." As Paul Krugman argued at the time, however, the stimulus was big enough to mitigate the worst and roughest edge of the recession, but not big enough to pull the country out of it. This means that the recovery, such as it is, is likely to be more protracted and less robust. It could be years, in other words.
One notes, too, that the "upper crust" of our financial world--big corporations, Wall Street--made billions last year. Everything else is down, but profits are up 42%. This means that our financiers and business moguls have found ways to make money without the participation of the rest of the American public.
The importance of the USA as a labor market has declined. The importance of the USA as a consumer market has also declined. (GM made a profit the past quarter largely because of international sales.) This means that the economic and financial elite of the United States will have less and less of an interest in the actual people of the United States.
Which is one of the several reasons we will not see another stimulus bill even though the first one worked.
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