A DEPRESSING RECESSION

This news probably will not be a shock to anyone though the details may have escaped them. The Associated Press (AP) has analyzed the ten recoveries from recessions the United States has undergone since World War II that lasted three years or longer. The current recovery that began in September of 2009 is the worst. See: http://www.huffingtonpost.com/2012/08/15/us-economic-recovery-weak_n_1783065.html#slide=1386217 

The article highlights comparisons of the current recovery with several of the earlier ones and some of the differences that set this one apart are striking.

The unemployment rate of 8.3 % is higher than at comparable points in a recovery. But government spending at all levels during the recovery is at its lowest level. For instance government spending in the second quarter was 4.5% lower than three years prior. Previous recoveries had seen an average growth in that same spending of 12.5%.

This lower spending has resulted in the loss of over 600,000 government jobs. If those  jobs had been retained the present unemployment rate would be approximately two full percentage points lower.

Contrast that to the recovery from the recession ending in 1982. Government spending and investment grew 15% in those three years and this was when Reagan was President.

As noted earlier this recovery has seen the loss of 642,000 government jobs whereas in the similar period after the 1973-74 recession over one million government jobs were added.

A very important additional factor to consider is the two-fold destructive effect of the housing market collapse combined with the financial and banking fiasco that dried up credit sources.

Housing prices dropped precipitously in many areas of the country and have yet to rebound. Millions of foreclosures have occurred, glutting the sales market and not only holding prices down but also discouraging new building since there is an oversupply of relatively newer inventory. Millions of owners are underwater in their mortgages, owing more on their balance than they could expect to sell their properties for.

To me these facts and numbers suggest several conclusions.

One is that the recent concentration of mostly Republican/conservative governors and lawmakers on slashing government services and spending in their states has been successful in achieving those objectives on the local level, but contributed greatly in undermining the economy as a whole.

Another observation is that those who have asserted that the Stimulus package enacted at President Obama’s request was, indeed, too little were right. A very large part of the $700 + billion commited to that stimulus was not in the form of outlays but rather in tax credits or other benefits  for small businesses.

The fact that further spending packages designed to encourage job growth have failed to pass muster with Congress, would indicate much blame lies in the legislative branch that has worried more about the debt than growing the economy.

To boot, the growing income inequality that has wracked this nation for the past thirty years or so has exacerbated the failure of wages to recover from any decline during the recession. But figures cited here many times and commonly found in other articles on wealth disparity demonstrate that the rich have not suffered a whit.

Then you have what is happening in Europe with various nations on the verge of financial collapse and you must acknowlege what happens in Europe does not stay in Europe but greatly influences America.

Now President Obama has been and is being taken to task for the economy not being in better shape. Much of that criticism is understandable and even defensible given all this is occurring on his watch.

Yet those who defend his policies and claim that Republican obstructionism is just as much at fault can build a very strong case based on this AP study. I myself have rebuked the right for its hypocrisy in using the high unemployment rate against Obama when the carrying out of policies they espouse have been a huge factor in creating unemployment.

I am not an economist…nor have I played one on television…and perhaps I am overly simplistic in my analysis, but the headlong rush to cutting the deficit, especially in the manner set forth in skeleton form by both Romney and Ryan, cannot have any other consequence than to drag out the recovery even longer, no matter their golden rhetoric.

Ultimately we cannot begin to address the deficit effectively until the economy is back in full swing. You can’t go about this process bass ackwards.

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