DALLAS (9/11/13)--The Great Recession cost each U.S. household between $50,000 and $120,000, or the equivalent of 40% to 90% of one year's economic output, according to a study released by the Federal Reserve Bank of Dallas (MarketWatch Sept. 10).
In total, that constitutes a $6 trillion to $14 trillion output loss--a combination of lost wealth, such as the lost value of a house, and decreases in current wage income and discounted future wage income from unemployment.
Other effects are more difficult to measure: extended unemployment, reduced opportunity and increased government presence in the economy, the Dallas Fed noted.
"The crisis consumed an enormous sum of financial and housing wealth. U.S. household net worth plunged $16 trillion, or 24%, from third quarter 2007 to first quarter 2009," said the Dallas Fed. "In addition, it wiped out a huge amount of 'human capital,' both current wage income and discounted future wage income; that is, a household's expectation of potential earning power.
"If the effects of the crisis are permanent, the path of consumption observed since 2007 suggests that the cost of the crisis may be more than double the $6 trillion to $14 trillion estimate," the study added.
One of the unintended consequences of the crisis is a substantial loss of faith in the U.S. capitalist economic system and government institutions. The U.S. dropped to 18th place in 2012 from second place in 2000, according to the Fraser Institute's Index of Economic Freedom global ranking. That lower ranking indicated prevalent "perceptions of less-secure property rights, bigger government, increased regulation of business and favoritism accorded to special interests," the study said.
To read the Dallas Fed study, use the link.