Notice how easy is was for them to prop up the economy and keep the depression away by stimulating gdp growth. A couple of trillion here and there and like magic growth reappears, but lets not get to ahead of ourselves just yet and remember and gdp growth over the last 18 months has been nothing but an illusion. I am waiting ever so patiently to see how long they take to stop these easy money policies and free handouts, then just maybe we can get the opportunity to see the economy stand on its own but that probably wont happen for another 10-20 years. Second Depression Averted Due to Bailouts: Study The New York Times | July 28, 2010 | 05:18 AM EDT Like a mantra, officials from both the Bush and Obama administrations have trumpeted how the governmentâs sweeping interventions to prop up the economy since 2008 helped avert a second Depression. Now, two leading economists wielding complex quantitative models say that assertion can be empirically proved. In a new paper, the economists argue that without the Wall Street bailout, the bank stress tests, the emergency lending and asset purchases by the Federal Reserve, and the Obama administrationâs fiscal stimulus program, the nationâs gross domestic product would be about 6.5 percent lower this year. In addition, there would be about 8.5 million fewer jobs, on top of the more than 8 million already lost; and the economy would be experiencing deflation, instead of low inflation. The paper, by Alan S. Blinder, a Princeton professor and former vice chairman of the Fed, and Mark Zandi, chief economist at Moodyâs Analytics, represents a first stab at comprehensively estimating the effects of the economic policy responses of the last few years. âWhile the effectiveness of any individual element certainly can be debated, there is little doubt that in total, the policy response was highly effective,â they write. Mr. Blinder and Mr. Zandi emphasize the sheer size of the fallout from the financial crisis. They estimate the total direct cost of the recession at $1.6 trillion, and the total budgetary cost, after adding in nearly $750 billion in lost revenue from the weaker economy, at $2.35 trillion, or about 16 percent of G.D.P. By comparison, the savings and loan crisis cost about $350 billion in todayâs dollars: $275 billion in direct cost and an additional $75 billion from the recession of 1990-91 â or about 6 percent of G.D.P. at the time. But the new analysis might not be of immediate solace to officials in the Obama administration, who have been trying to promote the âsummer of recoveryâ at events across the nation in the face of polls indicating persistent doubts about the impact of the $787 billion stimulus program. For one thing, Mr. Blinder and Mr. Zandi find that the financial stabilization measures â the Troubled Asset Relief Program, as the bailout is known, along with the bank stress tests and the Fedâs actions â have had a relatively greater impact than the stimulus program. If the fiscal stimulus alone had been enacted, and not the financial measures, they concluded, real G.D.P. would have fallen 5 percent last year, with 12 million jobs lost. But if only the financial measures had been enacted, and not the stimulus, real G.D.P. would have fallen nearly 4 percent, with 10 million jobs lost. The combined effects of both sets of policies cannot be directly compared with the sum of each in isolation, they found, âbecause the policies tend to reinforce each other.â Told about the findings, another leading economist was unconvinced. âIâm very surprised that they find these big impacts,â said John B. Taylor, a Stanford professor and a senior fellow at the Hoover Institution. âIt doesnât correspond at all to my empirical work.â Mr. Taylor said the Fed had successfully stabilized the commercial paper and money markets, but he argued that its purchases of $1.25 trillion in mortgage-backed securities have not been effective. And he said the Obama administrationâs stimulus program has had âvery little impact and not much to show for it except a legacy of higher debt.â The disagreement underscored the extent to which econometric estimates are heavily reliant on underlying assumptions and models, but Mr. Blinder and Mr. Zandi said they hoped their analysis would withstand scrutiny by other scholars. âWhen all is said and done, the financial and fiscal policies will have cost taxpayers a substantial sum, but not nearly as much as most had feared and not nearly as much as if policy makers had not acted at all,â they write.