When it first looked like Harvard Law professor Elizabeth Warren might stand a serious chance of getting appointed at the first director of the newly-created Consumer Financial Protection Bureau — a regulatory agency which she was the first to suggest — Senate Banking Committee Chairman Chris Dodd (D-CT) poo-pooed the notion, saying there’s a “serious question” about whether Warren is “confirmable.”

The New Republic’s Noam Scheiber wrote that “after surveying a dozen insiders over the last few days — congressional aides, industry officials, progressive activists, and a few administration officials — I’ve concluded that the odds are good that Warren would be confirmed if nominated by the White House.” And Dodd now seems to have shifted his rhetoric, saying that even if Warren is confirmable, it’s not worth a potential fight to get her the job:

What you don’t need to have is an eight-month battle for who the director or the head or chairperson of this new consumer financial protection bureau will be.

Watch it:

Dodd pretty clearly would prefer that current Federal Deposit Insurance Corp. Chair Shelia Bair receive the nod, but Bair has said that she’s not interested in the job. “I did some checking on Sheila Bair and I was going to have very little difficulty getting Sheila Bair confirmed,” said Dodd. “I’d probably confirm her in a couple of days. That’s how strongly people felt, Democrats and Republicans.”

Bair certainly has the credentials to do the job, as she was one of the first federal officials warning about the proliferation of subprime loans during the buildup of the housing bubble. But she’s doing very important work at the FDIC, and there’s simply no reason for passing over Warren.

As Paul Krugman wrote, “Warren really is a pioneering expert on household debt and financial distress, who has also shown an ability to work effectively in an official position.” The Boston Globe called her the “clear choice” for the CFPB job:

Warren, a Harvard Law School professor, has conducted extensive research on bankruptcy, predatory lending, and other consumer-finance issues. Throughout her tenure as head of a panel appointed by Congress to provide oversight of the federal bailout funds, Warren has sought to connect the machinations of the financial system with the struggles of average families. She raised early alarms about subprime mortgages, and her work casts light on how a deliberate obscurity in the terms of credit cards and mortgages contributed to an unsustainable growth of consumer debt.

Leaving aside Warren’s qualifications, it makes no sense to me that Dodd feels a political fight here isn’t worth it. Warren is an unabashed, articulate consumer advocate, and her nomination would set up a clear choice: consumers or the banks. After having overwhelmingly voted against the Dodd-Frank Wall Street reform bill, Republicans standing against her nomination would once again be siding with the financial services industry. I can’t see why we “don’t need” to show that dynamic at work.

Our guest blogger is Heather Boushey, Chief Economist at the Center for American Progress Action Fund.

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.”

Blinder and Zandi break out their estimates separately for the financial policies and the fiscal policies. They estimate that the American Recovery and Reinvestment Act and other fiscal policies have saved or created 2.7 million jobs and without them, unemployment would stand at 11 percent and job losses would have totaled 10 million. On top of this, they estimate that if nothing had been done to address the financial crisis — no Troubled Asset Relief Program, no bailout of American International Group Inc, and no investment in the auto industry — our economy would have 5 million fewer jobs than we do today and unemployment would be sharply higher, at 12.5 percent.

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.

How’s this possible? Quite simply: a big reason that the deficit is rising is because unemployment has risen and incomes are falling. As my colleague Michael Linden has pointed out, the reason for the deficit is the recession itself:

The great deficit of 2009 was the result not just of increased spending, but also of dramatically lower tax revenues. In 2009, federal receipts were $419 billion below 2008 levels, a 17 percent drop, which was the largest decline from one year to the next in more than 70 years. Individual income tax receipts decreased by 20 percent, and corporate income tax revenues plummeted by more than 54 percent, which means corporations paid less than half in taxes than they paid the year before.

Of course, the main culprit here is the economic recession. Corporations paid lower taxes because they made lower profits. Individuals paid less in taxes because they lost their jobs, didn’t get raises, and didn’t make as much on their investments. The tax cuts directed at both families and businesses passed as part of the American Recovery and Reinvestment Act had a part to play here as well—about 15 percent of the decline in tax revenues can be attributed to provisions in ARRA—but the overall trend was driven primarily by the weak economy.

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.