As the Senate debates financial reform, residents of Utah should be asking what the financial crisis cost all of them.
Recently the Pew Financial Reform Project asked Phill Swagel, an economist and former Treasury official under George W. Bush, to answer a simple question: What is the tab for the recent financial crisis? The results of his analysis are striking.
According to Swagel, from September 2008 through 2009, the crisis cost the United States an estimated $650 billion as a result of diminished economic growth. In other words, $650 billion in wages, corporate profits, interest and other income were never earned because of the crisis. That is nearly 10 times what the Congressional Budget Office estimates the Troubled Asset Relief Program (TARP) bailout will ultimately set back American taxpayers.
To make matters worse, these costs are still piling up. Swagel's analysis only calculated the losses through the end of 2009. Even as the economy begins to grow again, its output is far below what it would have been absent the financial crisis. The meter is still running.
What do these numbers mean for Utah? If one allocates the toll to states based on their population and share of U.S. gross domestic product, the financial crisis cost every household in Utah an average of nearly $6,000 in income. This money is gone for good.
Utah voters clearly understand the stakes of the current debate, according to a recent public opinion poll of likely voters commissioned by Pew and conducted by a bipartisan polling team. Ninety percent of respondents in Utah rate the country's economic situation as just fair or poor, while 71 percent think chances that the country will experience another financial crisis sometime in the next three years are 50-50, or better. Utah voters give Congress low marks, but big Wall Street banks receive worse.
Fifty-two percent of Utah voters see financial reform as helping to grow the economy and prevent future job losses. When asked about priorities for congressional and presidential action, a majority said they want action on financial reform now, even over other important priorities like jobs, health care reform and the war in Afghanistan.
As the debate heads into the home stretch and special interests complain vocally about what the new financial system could potentially cost them, we would all do well to remember what the failure of the current system actually cost each one of us. The time for reform is now.
John E. Morton is managing director of the Pew Economic Policy Group, which develops and promotes nonpartisan solutions to the nation's complex economic issues.
This op-ed appeared in the Salt Lake Tribune.
Pew is no longer active in this line of work, but for more information, visit the main Pew Financial Reform page.