Krugman Worries about a Double Dip Recession

Obama was far too tentative in dealing with the financial crisis. He relied on the bankrupt policies of Bush, i.e. support the banks and pray that the rest of the economy would follow. Now those chickens are coming home to roost.

In his blog, Paul Krugman is worried that the US is slipping back into recession:

I’ve never been fully committed to the notion that we’re going to have a “double dip” — that the economy will slide back into recession. But it has been clear for a while that it’s a serious possibility, for two reasons. First, a large part of the growth we’ve had has been driven by the stimulus — but the stimulus has already had its maximum impact on the growth of GDP, will hit its maximum impact on the level of GDP in the middle of next year, and then will begin to fade out. Second, the rise in manufacturing production is to a large extent an inventory bounce — and this, too, will fade out in the quarters ahead.

Two stories this morning highlight the risks. The WSJ has a report on highway construction titled Job Cuts Loom as Stimulus Fades:

Highway-construction companies around the country, having completed the mostly small projects paid for by the federal economic-stimulus package, are starting to see their business run aground, an ominous sign for the nation’s weak employment picture.
Meanwhile, the ISM for manufacturing suggests that industrial growth is already slowing down.

I’d be more sanguine about all of this if there were any indications that private, final demand is taking off — consumers, business investment, whatever. But I haven’t seen anything suggesting that sort of thing.

The chances of a relapse into recession seem to be rising.

I have lived for 60 odd years and watched the US make one disasterous decision after another for 50 years. Back in the late 1950s bad decisions had little effect because the US was so rich compared to other countries. It had size, depth, wealth, and a strong people. But idiot governments have made bad decision after bad decision and the US is now on the ropes. Obama promised "change you can believe in" and has delivered zip. He follows the same failed policies as his predecessors. His latest idiocy is to commit more troops to an unwinnable Afghan war. These bad decisions are bleeding the US dry. Sad.