Losses incurred by the financial crisis of 2007-2009 could exceed $10 trillion, and the effects could linger for years to come, according to a just-released report by the Government Accountability Office (GAO).
The GAO says in its report that studies estimating the losses of financial crises based on lost output—value of goods and services not produced—suggest losses associated with the recent crisis could range from a few trillion dollars to more than $10 trillion.
The crisis also resulted in large declines in employment, household wealth and other economic indicators, the report says, with some studies suggesting the crisis could have “long-lasting effects.” For example, “high unemployment, if persistent, could lead to skill erosion and lower future earnings for those affected.”
Since the crisis began, federal, state and local governments have also faced greater fiscal challenges, the report points out, “in part because of reduced tax revenues from lower economic activity and increased spending to mitigate the impact of the recession.”
The report—written at the request of Sen. Tim Johnson, D-S.D., chairman of the Senate Banking Committee, and Rep. Michael Capuano, D-Mass.—is called “Financial Regulatory Reform: Financial Crisis Losses and Potential Impacts of the Dodd-Frank Act.”