The Great Recession, officially beginning in December 2007 and unofficially ending June 2009, is now estimated, in revised measurements, to have seen a GDP decline of 4.1% (rather than previously estimated 3.7%). Other statistics have been revised also. Year 2008 saw zero growth (rather than 0.4% growth). Year 2009 saw a 2.6% decline in the economy (rather than 2.4% decline). Year 2007 saw 1.9% growth, not 2.1% growth.
What is the context of this awful decline? The main effective measure undertaken by the government to stop the recession was the bank bailout. Effective because, had the large banks failed, putatively (and certainly all experts expected) the economy's financial system would have collapsed and the economy with it, that is , we would have fallen into Great Depression Two. The stimulus packages (stimulus 1 under Bush and stimulus 2 under Obama) did nothing to halt the economy's decline. The result was that half of the government's anti-recession efforts were futile. They led to several Democratic measures that will formally hobble recovery--financial and banking regulatory reform and consumer credit reform--by restricting credit and increasing the administrative and regulatory overhead, thereby decreasing lending flexibility and effectiveness. The effect of the expansion of the federal government on the economy (ObamaCare mainly but also all government departments) and the increase in taxation in 2010 through 2014 will dramatically hobble economy recovery, ensuring that growth is weak.
At every step, the federal government failed to understand the social depth of the Great Recession. They failed to grasp the profound changes it was making in the social-occupational structure and, as a result of those changes, in the household economy. Looking at the nation through the statistical macroeconomic model of economic and financial data, the government did not see the great changes in the social reality of the nation. The political party in charge of the government, Obama's administration and the Democratic Party in Congress, were preoccupied with taking advantage of the economic crisis to make political gains and failed to understand what was going on in American society (hence their suprise at the Tea Party Movement).
The result of this protracted economic weakness is creation of a structural sector of the unemployed. Some of this sector will be hidden, because of the definitions and methods used by the government to measure unemployment. But we will see in official statistics 8-10% permanent unemployment, plus another 5% points of permanent under-employment, and a diminution of the nation's labor force. This unemployment/under-employment sector will decrease productive, further dragging the economy.
We are in for a long slog against a turgid economy. Only a revolution in the political-economy paradigm, replacing "progressive democratic socialism" with "enterprise and consumer freedom" will bring us back the economic growth and the prosperity that we need to fulfill every Americans' personal potential and keep the nation at the level of international strength required for our security.
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