Stimulus played huge role in economic recovery

Marketplace Contributor Jul 28, 2010
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Stimulus played huge role in economic recovery

Marketplace Contributor Jul 28, 2010
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TEXT OF INTERVIEW

Bill Radke: A new report out today shows the government stimulus programs passed last year were key to the economic recovery so far. Marketplace’s Janet Babin has looked at the report and she joins us live this morning to talk about it. Hi Janet.

Janet Babin: Hey Bill.

Radke: So the report says stimulus worked. But how big an impact did it really have?

Babin: Well according to this report, it had a huge effect. The economists say without it, we’d be living through the second Great Depression. The study is from economist Mark Zandi with Moody’s Analytics and Princeton professor Alan Blinder. And they came up with their analysis using sophisticated modeling techniques. The model they used is actually the same one that banks used for those stress tests we’ve heard so much about.

Radke: Yes, stress tests again — second time we’ve heard that this morning. So, they ran this model with all the stimulus. How bad do they think could it have been without that spending?

Babin: Well, take jobs, for example. Zandi says the job losses we’d be dealing with now would have been stunning if it weren’t for government intervention:

Mark Zandi: We lost about 8.5 million jobs from the peak to the trough. If we had not had the extraordinary policy efforts, our estimate is that job losses, peak to trough, would have been just about double that, 16 [million] to 17 million.

Radke: OK Janet, so spin this forward: We have been debating, right, more stimulus or not. Does the research suggest whether the government ought to do that?

Babin: Yeah Bill, these models are subjective so this research can’t answer that debate definitively. But Zandi says according to his research, certain kinds of stimulus work, like extending emergency unemployment benefits and helping states with their fiscal problems. He says those should be continued.

Radke: All right. Marketplace’s Janet Babin. Janet, thanks a lot.

Babin: Thank you, Bill.

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