The Recession Is Over!
Mark Zandi on the Great Recession:
http://jec.senate.gov/index.cfm?FuseAction=Files.View&FileStore_id=c71959bb-2a15-4834-a6a2-a16646d17a85: The Great Recession has finally given way to recovery. This downturn will go into the record books as the longest, broadest and most severe since the Great Depression (see Table 1). The recession was twice the length of the average economic contraction, and it dragged down nearly every industry and region in the country. Its final toll in terms of increased unemployment and falling real GDP will be greater than that seen during any other recession on record....
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The fiscal stimulus is also working. The American Recovery and Reinvestment Act passed early this year has reduced payroll tax withholding, sent checks to Social Security recipients, and provided financial help to unemployed workers whose normal benefits have run out. The cash for clunkers program revved up vehicle sales, and the housing tax credit has boosted home purchases.iii It is no coincidence that the Great Recession ended just as the stimulus began providing its maximum economic benefit (see Chart 1).iv The stimulus is doing what it was supposed to do: short-circuit the recession and spur recovery....
Criticism that only $175 billion of the $787 billion stimulus plan has been distributed through tax cuts and increased government spending is misplaced (see Table 2).v What matters for economic growth is the pace of stimulus spending, which surged from nothing at the beginning of the year to about $80 billion in the third quarter. That is a big change in a short period and is why the economy is growing again after more than a year....
The part of the stimulus providing the biggest bang for the buck—the most economic activity per federal dollar spent—is the extension of unemployment insurance benefits (see Table 3). Workers who lose their jobs before the end of 2009 can temporarily receive more UI, food stamps, and help with health insurance payments. Without this extra help, laid-off workers and their families would be slashing their own spending, leading to the loss of even more jobs....
Federal aid to strapped state and local governments also is providing significant economic benefits, lessening their need to slash programs and jobs or to hike taxes and fees. State and local tax revenues have fallen by nearly $120 billion during the past year, but government expenditures have merely gone flat, because federal grants in aid have soared by almost $110 billion (see Chart 2).vi The decline in income, sales, property and capital gains taxes has been unprecedented and shows only marginal signs of abating...
But, unfortunately, it looks as though the odds are better than even that the jobless recovery has begun.
