The financial crisis and recession cost US households an average of about $100,000 in lost wealth and income, according to a study by former Treasury Department economist Phillip Swagel.
By Rebecca Christie
Bloomberg
The financial crisis and recession cost U.S. households an average of about $100,000 in lost wealth and income, according to a study by former Treasury Department economist Phillip Swagel.
From June 2008 through March 2009, households’ stock holdings fell $66,000 and real estate dropped $30,000, according to the study released today by the Pew Economic Policy Group. Each household also lost an average $5,800 from unemployment and lower earnings from September 2008 through December 2009, the study said.
While stocks have rebounded this year, the fallout from the crisis was broader than the price of the government’s $700 billion bank rescue or $787 billion economic stimulus package, the study said. Swagel said the losses probably won’t be recouped until 2011 at the earliest.
“You want to avoid these crises,” he said in an interview. “Once you get into it, even if you do everything right, it’s still tremendously costly.”
The Pew study looks at how the financial crisis affected the overall U.S. economy, not just government spending on bailouts and rescues. It urges policy makers to consider the impact of a crisis when weighing preventive measures, in order to get a sense of the “potential value” those measures might bring.
In the five quarters ended December 2009, gross domestic product was $648 billion less than the Congressional Budget Office predicted. Swagel said that figure illustrates an economic toll beyond the cost of government efforts to arrest recession and restore financial stability.