Moving the Economy Forward
The first step in creating jobs and restoring economic growth is to get a clear picture of our economic situation. The financial crisis of 2008 cost our economy 8 million jobs and cost American families more than 16 Trillion dollars of net worth. Bill Foster believes that emergency intervention was required to avoid another Depression, but that it will take time to repair the damage caused by a decade of economic mismanagement. This means restoring fiscal discipline to our government, re-balancing our economy, improving the health of U.S. manufacturing, rebuilding the middle class and reforming Wall Street to prevent a crisis like this from ever happening again.
The 2008 Economic Collapse and the Emergency Intervention Families in the United States faced their worst economic conditions in generations as a result of the 2008 crisis. In a period of 18 months, Household Net Worth – the total of everything a family owns: its house, retirement funds, bank accounts, and any small businesses it owns – dropped by more than 16 Trillion Dollars. This is more than $50,000 for every man, woman, and child in the United States.
As a businessman, Bill Foster supported three crucial steps for economic recovery:
1) An emergency intervention to prevent our economy from spiraling into another Great Depression. This intervention included cutting taxes to their lowest point in 60 years and making targeted investments in our economy. As a result, a depression has been avoided, retirement funds are recovering, business profits recently surpassed pre-crisis levels, and jobs are starting to be created for the first time in years. Unfortunately nearly ten years of bad economic leadership and misplaced priorities created this recession, and it will take us years to get out of it.
2) Restoring balance to our economy by reversing the economic mismanagement of the last decade. This includes returning to fiscally responsible practices with government finances, reforming broken trade policies, improving the business climate, and reviving the health of U.S. manufacturing. As a businessman who started a company that now provides hundreds of good manufacturing jobs here in the Midwest, Bill Foster knows what it takes for businesses to grow.
3) Reforming Wall Street to make sure we never again face a preventable crisis like economic disaster of 2008. As a member of the Financial Services Committee, Bill played a strong role in crafting legislation that will prevent the irresponsible practices that led to this crisis while ensuring a stable and efficient Financial Services industry for decades to come.
The Emergency Intervention:
In response, a targeted intervention in our economy was put in place: Tax cuts for small businesses and individuals, making funds available to banks, unfreezing lines of credit, providing incentives for consumers to buy homes, and extending benefits for the unemployed.
These policies triggered a V-shaped recovery in which more than half of the damage hs been restored. Household Net Worth has rebounded by more than 8.7 Trillion Dollars,
and new jobs are starting to be created.
WORSE THAN THE GREAT DEPRESSION
The hit that our economy took during this financial crisis was actually worse than in the Great Depression. At the start of the Great Depression, Household Net Worth dropped by 12% over a period of four years from 1929-1933. In contrast, Household Net Worth dropped by more that 25% in a period of 18 months ending in March 2009.
In retrospect, it is remarkable that our economy did not fall into a full-blown recession following the 2007 collapse. Although the downturn was two times worse than the Great Depression, the recovery has actually been more rapid.
HOW SUCCESSFUL WAS THE EMERGENCY INTERVENTION? In politics, it is easy to criticize any action after it was taken. There are no controlled experiments to examine the results if things had been done differently. However, financial experts have developed computer simulations of the economy that allow us to answer questions like “what would have happened if we had done nothing when the crisis hit?”
One such calculation, done by a Republican economist Mark Zandi (John McCain’s economic advisor) and Alan Blinder (former vice-chairman of the Federal Reserve) indicates that:
If we had done nothing,
Considering that the ultimate cost of this emergency intervention will be roughly 1.5 Trillion dollars, this intervention generated a very respectable return on investment. In all aspects, the condition of our economy today is better than if we had followed those advocating to continue the same failed and “do-nothing” policies that created this mess.
NEXT: Creating Jobs