Heather Boushey, Chief Economist at the Center for American Progress Action Fund, writes about the economy failing to go over the cliff and the deficit. She says:
In their report, How We Ended the Great Recession, Economists Alan Blinder and Mark Zandi estimates the effects of the financial and fiscal policies enacted since the crisis began in 2008 on the economy. Their conclusion is that had the combined financial and fiscal policies not been enacted, “GDP in 2010 would be about 6.5 percent lower, payroll employment would be less by some 8.5 million jobs, and the nation would be experiencing deflation.”
and also:
However, one tidbit in the report that has received little notice is that by acting, Congress actually reduced our potential deficit problem. Given the policy steps taken, Blinder and Zandi estimate that by the end of the 2010 fiscal year, the federal budget deficit will be $1.4 trillion and it will fall to $1.15 trillion in fiscal year 2011 and $900 billion in fiscal year 2012.
However, had Congress done nothing, the deficit would have ballooned even higher, hitting over $2 trillion by the end of the 2010 fiscal year, $2.6 trillion in fiscal year 2011, and $2.25 trillion in fiscal year 2012. That’s right, doing nothing would have meant that the 2012 federal budget deficit would likely be over 2.5 times as large as taking the steps we took.
And she finishes:
By taking actions to avert greater unemployment, we averted a bigger deficit. It seems there’s a win-win here that everyone should get on board with: the steps taken to shore up our economy have ended up being a better investment for jobs and for the deficit than doing nothing at all.
No doubt this is all close to the mark, and that as she and her colleague Michael Linden also say: “. . . The reason for the deficit is the recession itself.” But, why stop there, why not ask: What if the stimulus had been $1.6 Trillion as some economists like Jamie Galbraith, though not Blinder and Zandi, were calling for, then what would have been the impact on unemployment and the deficit then?
Isn’t it likely that the same model Blinder and Zandi are using to estimate the impact of the actual stimulus could also be used to estimate the impact of those early proposals that the Obama Administration, in its infinite wisdom, and concern for bipartisanship, took off the table?
And, if so, just how many jobs did those early machinations of Rahm Emanuel, Larry Summers, Timothy Geithner, the Blue Dogs in the Senate, and the Republicans, including the moderates who eventually voted with the Democrats on that final emasculated stimulus compromise, cost the American people?
And if that larger stimulus had passed, then what would be the deficit prospects right now? Would we even be looking at a deficit in 2012 at all? Would we be wasting our time talking about the Catfood Commission now?
As the saying goes, inquiring minds want to know the answer to these questions? So, what do you think the answers are Heather Boushey?
(Cross-posted at FireDogLake and Fiscal Sustainability).