The financial crisis produced the most severe recession since the end of World War II in all the important measures of economic performance, aside from unemployment rates. Unemployment peaked at 10.2% in 2009, whereas it peaked at 10.8% in December 1982 at the end of the deep recession that spanned 1981-82. The recovery from that earlier recession was rapid, as unemployment was down to about 7.5% by 1984, and GDP grew rapidly in 1983 and 1984. By contrast, as Posner indicates, GDP growth has been slow to moderate in the two years following the official end in 2009 of the past recession. Real GDP is about 10% below the level it would have been at if growth in GDP continued after 2008 at its long term rate of 3% per year.
At the height of the financial crisis, the media frequently had discussions of the “failure of capitalism”, and the need to radically rein in the private sector through extensive regulations and other government activities. The politically liberal Congress elected in 2008 along with President Barack Obama reflected these views. In addition to taking various steps to try to fight the recession, leading members of the new Congress, and President Obama as well, considered they had a mandate to reengineer the American economy through more radical government interventions (see the discussion of uncertainty and the recovery by Steven Davis, Kevin Murphy, and myself in the Wall Street Journal, January 4, 2010, “Uncertainty and the Slow Recovery”).