Bad Recession Requires Bold Responses
The Politics
On Monday, the National Bureau of Economic Research formally declared that the U.S. economy entered a recession in December 2007—the second economic downturn of George W. Bush’s presidency. We’ve lost jobs every month since then. This downturn, already long, is likely to be painfully deep unless our government quickly enacts an economic recovery program that is substantial, strategic, and sustained.
The Facts
The current recession is already unusually long. Recessions in 1990-91 and 2001 each lasted only eight months. This one has already lasted a year, making it the longest contraction since 1982. Virtually all economists expect this recession to continue through 2009, if not longer, which will make it the longest economic downturn since the Great Depression. [National Bureau of Economic Research]
Americans continue to lose their jobs at an alarming rate. So far this year, 1.2 million workers have lost their jobs, and there are now 10.1 million unemployed Americans. U.S. employers cut 240,000 jobs in October and another 325,000 in November. On December 5, the Labor Department is expected to report an increase in the jobless rate to about 6.8 percent—the highest level since 1993. [Bloomberg] Some analysts believe the unemployment rate could reach 10 percent in 2009. [Reuters]
The housing market remains a disaster. The median price of a single-family home has dropped by 22 percent since July 2006. [USA Today] It is the first time since the Great Depression that home prices have declined for an extended period. [NuWire Investor] Today, one of every 11 mortgages in America is delinquent or in foreclosure. One in six homes with a mortgage is under water, worth less than the mortgage. [Wall Street Journal] The average homeowner has lost more than $70,000 in home equity over the past two years. Nationwide, we’ve lost nearly $6 trillion in housing wealth. Home sales are at a seven-year low and experts say the housing market will continue to plummet into 2009.
Americans have lost $8 trillion in the stock market. The Dow Jones Industrial Average has dropped by about 40 percent in little more than a year. [Dean Baker, Philadelphia Inquirer]
Most have little or no savings with which to weather the economic storm. Our nation’s personal savings rate is now at its lowest point since the Great Depression. [Bureau of Economic Analysis]
Because of lost jobs, diminished assets and insufficient savings, Americans are now spending less. Consumer spending plunged in the third quarter of 2008. [New York Times] U.S. auto sales dropped 37 percent in November to the lowest annual rate in 26 years. [Bloomberg] Home construction has hit a 50-year low. [MSNBC] Consumer confidence is at its lowest rate in history. [Conference Board] Unless it is offset by government action, diminished consumer spending means the economy will continue to slow and unemployment will continue to rise.
The Argument
Bush helped Wall Street but not Main Street. The Bush administration has used trillions of dollars to prop up Wall Street’s banks, but other than the ineffective tax rebates this year, Bush has opposed and threatened to veto any program aimed at putting Main Street back to work.
Senate Republicans have blocked even modest stimulus legislation. In September, Senate Republicans used a filibuster to kill a modest, $56 billion stimulus plan. Even today, as the economy nosedives, they continue to block similar legislation.
Economists call for a major economic recovery program. Leading economists like Paul Krugman, Joseph Stiglitz, Dean Baker—and even the great majority of economists surveyed by The Wall Street Journal—support a large-scale economic recovery plan.
Progressive Solutions
America urgently needs a bold recovery program to keep itself from falling into a deep, painful recession. Without a substantial, strategic, and sustained recovery program to lift the real, Main Street economy, we risk economic disaster.
For more about our Main Street Economic Recovery Plan, click here.
