Source: Back to Work: Why We Need Smart Government for a Strong Economy by Bill Clinton
Abstracted from pages 4-6
How do we ensure America’s economic, political, and security leadership in the more competitive, complex, fragmented, and fast-changing world of the 21st century? The 2010 election involved inflated rhetoric and ferocious but often inaccurate attacks that shed more heat than light. The attack proved to be very effective in the election, but I thought it was all wrong.
First, the meltdown happened because banks were overleveraged. In other words, there was not enough government oversight or restraint on excessive leverage.
Second, the meltdown did not become a full-scale depression because the government acted to save the financial system from collapse. Of course, the stimulus didn’t restore the economy to normal levels. It wasn’t designed to. You can’t fill a several-1,000,000,000,000-dollar hole in the economy with $800 billion. The stimulus was designed to put a floor under the collapse and begin the recovery.
Third, according to most economic studies, the stimulus, along with the rescue and restructuring of the auto industry, succeeded in keeping unemployment 1.5 to 2% lower than it would have been without it.
In other words, the crash occurred because there was too little government oversight of and virtually no restraint on risky loans without sufficient capital to back them up; the recession was prevented from becoming a depression because of a government infusion of cash to shore up the banking system; and the downturn hurt fewer people because of the stimulus, which is supplemented wages with a tax cut, saved public jobs, and created jobs through infrastructure projects and incentives to create private-sector jobs, especially in manufacturing.