Over at the Washington Center for Equitable Growth: One of the many, many interesting things in the Federal Reserve's 2008 transcripts is the staff briefing materials for the mid-December FOMC meeting, which include:
The Federal Reserve's forecasts as of mid-December surely assume some boost to the economy from a Recovery Act program, but one in the $300 billion-over-three-years rather than the--enacted--$800 billion-over-three-years program. Their forecasts see the unemployment rate peaking at 8.2% at the end of 2009. Arithmetic suggests that had they included the actual Recovery Act their peak forecast unemployment rate would have been 6.7% or so.
In this context, the Romer-Bernstein forecast of a peak unemployment rate of 8% with an $800 billion Recovery Act was a very alarmist and pessimistic forecast--and, of course, one much closer to a correct picture of the economy than Bernanke's staff was churning out at the time: