The Economy Wreckers: A.K.A.

Deficit Hawks
Presentation to the U.S. Chamber of Commerce October 18, 2010

Dean Baker, Co-Director Center for Economic and Policy Research

1) The economic collapse was entirely foreseeable and preventable 2) The obsession with the deficit distracted attention from the impending crisis 3) The current economic situation is a disaster for non-corporate America 4) The deficit problem was and is a broken health care system

1) The story of the collapse was an $8 trillion housing bubble

Collapse led to a $600 billion plunge in annual consumption Collapse led to a $600 billion plunge in annual construction Annual S&L spending would have fallen $150-$200 billion, absent stimulus Total shortfall in annual demand @ $1350-$1400 billion

2) Bubble was easy to see unprecedented 70 percent run-up in real house prices

Policymakers Missed the Bubble

deficit hysteria fiscal wake-up tour, economic sleepwalking tour Washington Post hype the deficit every day, ignore the bubble Peter Peterson -- $1 billion to hype the deficit

No Consequences for Missing the Bubble Worst Economic Disaster in 70 years

blanket amnesty: who could have known? no policymakers or regulators were fired or even missed a promotion

Devastated Economy
more than 25 million unemployed, underemployed or dropped out of workforce savings of near retirees devastated median near retiree has net worth of $180k millions facing loss of home

Black Teen Employment to Population Ratio

35 30 25 Percent 20 15 10 5 0 2000 Source: Bureau of Labor Statistics 2007 Sept 2010

Corporate Profits Fully Restored

Domestic Corporate Profits (broad measure) 1,700 1,600 1,500

illi $

    

 

  

B r

1,400 1,300 1,200 1,100 1,000 900 800 I II III IV I II III IV I II III IV I II

2007 E mi A

2008 ly i , N i lI m

2009 d r d A

2010

Continued Deficit Hysteria Obstructs Stimulus

Washington Posts yellow journalism Peter Petersons billion

The Long-term Deficit Problem Is a Health Care Cost Problem