J. Bradford DeLong is Professor of Economics at the University of California at Berkeley and a Research Associate at the National Bureau of Economic Research. This column is from the Project Syndicate news series.
Why Are Good Policies Bad Politics?
By J. Bradford DeLong
BERKELEY – From the day after the collapse of Lehman Brothers last year, the policies followed by the United States Treasury, the US Federal Reserve, and the administrations of Presidents George W. Bush and Barack Obama have been sound and helpful. The alternative – standing back and letting the markets handle things – would have brought America and the world higher unemployment than now exists. Credit easing and support of the banking system helped significantly by preventing much worse.
The fact that investment bankers did not go bankrupt last December and are profiting immensely this year is a side issue. Every extra percentage point of unemployment lasting for two years costs $400 billion. A recession twice as deep as the one we have had would have cost the US roughly $2 trillion – and cost the world as a whole four times as much.