I wasn’t aware of this (click on the figure for a larger graph):

[I used this as part of a talk on Monday night at the Wayne Morse Center here at the UO (I'm on the Board of Directors for the Center). Dean Baker spoke first, and he talked about what caused the recession. I followed with what is likely to come next and how policymakers might help the economy in the short-run and long-run.

In his talk, Dean Baker argued it was the housing bubble that caused the recession, not the collapse of the financial sector -- he argues that if the financial crash had not occurred, we still would have had a severe recession. I agree that the housing bubble was the primary cause, but I also think the financial sector played a role in making things worse, e.g. through the unwinding of high, under-regulated leverage ratios. I talked about both short-run and long-run problems and what we might do about them. The graph above was part of a discussion of how we might improve things for labor (the graph is from Tim Taylor, he has another graph I included in the talk showing increased wage polarization. The percentage of workers earning less than 2/3 of the median wage has increased from 22% in 1979 to 28% in 2009.]

This post originally appeared at Economist’s View and is posted with permission.