Author Topic: The Wrong Worries  (Read 1175 times)

Offline Reginald Hudlin

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The Wrong Worries
« on: August 05, 2011, 09:38:34 am »

August 4, 2011
The Wrong Worries
In case you had any doubts, Thursdayís more than 500-point plunge in the Dow Jones industrial average and the drop in interest rates to near-record lows confirmed it: The economy isnít recovering, and Washington has been worrying about the wrong things.

Itís not just that the threat of a double-dip recession has become very real. Itís now impossible to deny the obvious, which is that we are not now and have never been on the road to recovery.

For two years, officials at the Federal Reserve, international organizations and, sad to say, within the Obama administration have insisted that the economy was on the mend. Every setback was attributed to temporary factors ó Itís the Greeks! Itís the tsunami! ó that would soon fade away. And the focus of policy turned from jobs and growth to the supposedly urgent issue of deficit reduction.

But the economy wasnít on the mend.

Yes, officially the recession ended two years ago, and the economy did indeed pull out of a terrifying tailspin. But at no point has growth looked remotely adequate given the depth of the initial plunge. In particular, when employment falls as much as it did from 2007 to 2009, you need a lot of job growth to make up the lost ground. And that just hasnít happened.

Consider one crucial measure, the ratio of employment to population. In June 2007, around 63 percent of adults were employed. In June 2009, the official end of the recession, that number was down to 59.4. As of June 2011, two years into the alleged recovery, the number was: 58.2.

These may sound like dry statistics, but they reflect a truly terrible reality. Not only are vast numbers of Americans unemployed or underemployed, for the first time since the Great Depression many American workers are facing the prospect of very-long-term ó maybe permanent ó unemployment. Among other things, the rise in long-term unemployment will reduce future government revenues, so weíre not even acting sensibly in purely fiscal terms. But, more important, itís a human catastrophe.

And why should we be surprised at this catastrophe? Where was growth supposed to come from? Consumers, still burdened by the debt that they ran up during the housing bubble, arenít ready to spend. Businesses see no reason to expand given the lack of consumer demand. And thanks to that deficit obsession, government, which could and should be supporting the economy in its time of need, has been pulling back.

Now it looks as if itís all about to get even worse. So whatís the response?

To turn this disaster around, a lot of people are going to have to admit, to themselves at least, that theyíve been wrong and need to change their priorities, right away.

Of course, some players wonít change. Republicans wonít stop screaming about the deficit because they werenít sincere in the first place: Their deficit hawkery was a club with which to beat their political opponents, nothing more ó as became obvious whenever any rise in taxes on the rich was suggested. And theyíre not going to give up that club.

But the policy disaster of the past two years wasnít just the result of G.O.P. obstructionism, which wouldnít have been so effective if the policy elite ó including at least some senior figures in the Obama administration ó hadnít agreed that deficit reduction, not job creation, should be our main priority. Nor should we let Ben Bernanke and his colleagues off the hook: The Fed has by no means done all it could, partly because it was more concerned with hypothetical inflation than with real unemployment, partly because it let itself be intimidated by the Ron Paul types.

Well, itís time for all that to stop. Those plunging interest rates and stock prices say that the markets arenít worried about either U.S. solvency or inflation. Theyíre worried about U.S. lack of growth. And theyíre right, even if on Wednesday the White House press secretary chose, inexplicably, to declare that thereís no threat of a double-dip recession.

Earlier this week, the word was that the Obama administration would ďpivotĒ to jobs now that the debt ceiling has been raised. But what that pivot would mean, as far as I can tell, was proposing some minor measures that would be more symbolic than substantive. And, at this point, that kind of proposal would just make President Obama look ridiculous.

The point is that itís now time ó long past time ó to get serious about the real crisis the economy faces. The Fed needs to stop making excuses, while the president needs to come up with real job-creation proposals. And if Republicans block those proposals, he needs to make a Harry Truman-style campaign against the do-nothing G.O.P.

This might or might not work. But we already know what isnít working: the economic policy of the past two years ó and the millions of Americans who should have jobs, but donít.

Offline Hypestyle

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Re: The Wrong Worries
« Reply #1 on: August 05, 2011, 12:11:17 pm »
...where is the new version of the W.P.A.?  directly create jobs to address various infrastructure, education needs..
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