The U.S. is still struggling to claw out of the hole created by the Great Recession, the Wall Street-caused crisis that resulted in the loss of millions of jobs. According to a new report from Better Markets, a pro-financial reform organization, the crisis cost Americans about $12.8 trillion in lost economic output:
– Estimated actual gross domestic product (“GDP”) loss from 2008 to 2018, of $7.6 trillion. This is the cumulative difference between potential GDP — what GDP would have been but for the financial and economic crises– and actual and forecast GDP during the period.
– Estimated avoided GDP loss from 2008 to 2012 of $5.2 trillion. This figure is the estimated additional amount of GDP loss that was prevented only by extraordinary fiscal and monetary policy actions. It is derived from the model-based estimate of Alan Blinder and Mark Zandi of $6.9 trillion, less $1.7 trillion in adjustments. (Because the Blinder/Zandi simulation ends in 2012, it does not include any avoided losses for the 2013-2018 period. For example, the effects of any ongoing or additional crisis-related monetary policy—such as Federal Reserve purchases of agency mortgage-backed securities—will continue past 2012.)
The shaded area in this chart represents the gap between what GDP would have been were it not for the financial crisis and the path that growth actually took.
As Better Markets added, “There are millions of Americans and perhaps tens of millions of Americans who will never regain their earnings, educations, skills, and trainings that they lost during and as a result of the crises. This is, obviously, terrible for those individuals, but it also damages the entire country as our potential GDP is far lower than it otherwise would be if this human capital had not been destroyed.”
Despite this huge loss of output, Republicans are still intent on preventing the implementation of the Dodd-Frank financial reform law, instead preferring that banks be allowed to go right back to the behavior that led directly to the Great Recession.