In Denial? Out of Touch? What Do We Mean By Recession?
Reading this morning’s news coverage of yesterday’s significant losses at the stock market, I notice certain phrases keep popping up that seem to indicate a sense of denial or delusion about the actual state of the economy. Let’s use this WaPo article as Exhibit A, it’s chockfulla.
The very first sentence starts off with a bang: “Fears that the global economy could be slipping back toward recession….” Slipping back? Did it ever leave? Look, I know there are strict definitions about “recession” that economists favor; but two consecutive periods of negative growth does not begin to describe the persistently high levels of unemployment, mortgage default, deflation, homelessness, etc. the world has been suffering.
The same complaint can be lodged against the phrase “while the chance of another U.S. recession” thrown in a couple paragraphs later, the implication being the chance exists, it hasn’t happened yet. No, it has not stopped happening. It is ongoing.
Granted, I think the word “recession” itself is a euphemism of denial. I have already lived through several of them in my 41 years — an average rate of two a decade seems about right — and while a few might sit happily within the textbook definition, others seemed awfully closer to mini-depressions. Perhaps my view on this is skewed by having grown up in a Rust Belt town like Buffalo, NY, which lost good-paying industrial jobs that never came back, forcing workers to either pack up and leave town or to find work in the low-wage service sector. Either way, my hometown suffered decades of “negative growth” as a result. And it has not been alone: witness Detroit, parts of which look more like post-Taliban Kabul than a bummed out American city.
Anyway, here’s another marker of denial or delusion: “The United States’ recovery is stalling” appears in the second paragraph of this story. Again, what recovery? Who has recovered? Let’s jump over to Paul “Shrill” Krugman for a little perspective:
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 hasn’t 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 — maybe permanent — unemployment. Among other things, the rise in long-term unemployment will reduce future government revenues, so we’re not even acting sensibly in purely fiscal terms. But, more important, it’s a human catastrophe.
When you read phrases like “for the first time since the Great Depression” — and you can find those just about anywhere in economics reporting — that should be a signal to stop thinking in terms of quaint concepts like “recession” and more urgent realities that the D-word suggests. Yet it is this kind of denial/deluded thinking that pervades policy making around the globe, in particular in Warshingtun, where libertarians and flat-earthers have taken over the debates, while winning both legislative and ideological concessions from more sober minded folks who should know better. Or maybe they shouldn’t — maybe they, too, are incapable of seeing how bad things are, because they long ago drank the neoliberal Kool-Aid that a few policy tweaks here and there will bring things around, no need for fundamental changes or — heavens! — risking a rise in the deficit.
All of which brings us to the next phrase, again taken from the first sentence of this article (such a good sentence, so packed with meaning, intended and otherwise): “…economic and financial problems around the world fueling a vicious cycle that risks spiraling beyond the control of governments.” Let’s pair this one with a paragraph key to this whole terrible story:
Investors are increasingly afraid that the world’s leading governments, weighed down by debt and wounded by the last economic downturn, might not have the wherewithal to keep the emerging crisis in check.
Investors caught up with the rest of us: our governments are failing us. Ironically, it’s the very teabagger movement so happily endorsed by the Rick Sentellis of the investor class not so long ago that has made this failure a reality.
Edited to Add: Quoted later in this same article, here is a guy clued into reality. His breakdown of our problems should be put in bullet points in a memo sent to the White House and Congress, including that SuperCommittee that will be tasked with slashing gubmint spending.
“The whole debate over the debt ceiling sent four negative messages to the markets,” said Ethan Harris, chief North American economist for Bank of America-Merrill Lynch. “That we have a big debt problem, that we can’t fix it because we have a dysfunctional political system, that it’s okay to use the threat of default to achieve political ends, and that there’s no safety net if the economy goes into recession because we’re not going to have any more fiscal stimulus.”
Solving our debt problems without a safety net and a fiscal stimulus = dumb.