A View on the Failing US Recovery

Here are some bits from a post on the Free Exchange blog at The Economist magazine:

Yesterday, the Federal Open Market Committee concluded its June meeting and released new economic projections. I found them profoundly disappointing. American unemployment is expected to remain uncomfortably high through 2013 at least (in which year the Fed projects an unemployment rate between 7.0% and 7.5%, up from April's estimate). Keep in mind that 2013 is 7 years from the official start of the recession. One simply can't look at projections of serious labour market difficulties over that stretch of time and see anything other than a major crisis, for workers, wages, and budgets.

There's no real mystery behind the slow improvement in employment; it flows directly from the lacklustre growth in the economy. The Fed projects that the economy will expand at less than 3% for 2011 as a whole; growth was revised downward for 2011, 2012 and 2013. It should be noted once again that rapid labour market recoveries are associated with periods of rapid, above-trend growth. If you don't have the latter, you don't get the former.

...

I don't expect the Fed to work miracles. There are lots of economic problems Ben Bernanke can't solve. I do expect the Fed to do its job, and right now it looks like the Fed is saying it has no responsibility for meeting its nominal goals. That's not acceptable.

Mr Bernanke has been clear about why he's reluctant to act at this moment. He thinks the current hiccup is largely due to temporary factors. And I think he's mostly right about that. But it shouldn't matter. Temporary factors can turn permanent if expectations begin falling. ... I understand that a conservative Fed is reluctant to act without a clear view of the economy's trend. But the Fed also shapes the trend, and by publishing these projections and stating that it's comfortable with them, the Fed is helping to orchestrate a too-slow recovery.

It is a tragedy for the 14 million unemployed that they are being (a) left to pay the price of Wall Street's greed and (b) Obama has clearly decided to let them pay this price because he is refusing to use the resources of the federal government to stimulate the economy and stretch out a lifeline to those marooned by the recession.

Of course the fat cats and those with jobs are more "worried" about inflation and deficits than they are with unemployment. They can be hurt by the former but not the latter. So they are protecting their interests by yammering about the "possibility" of inflation and their "worries" about deficits. But that means they are perfectly willing to let the 14 million have their lives destroyed by an economic shipwreck that was not of their making.

If the US was consistent, then when a tornado wrecks a town like Joplin Missouri there should be protests in other towns against sending in emergency aid or rescue specialists because that would threaten the "well-being" of the unaffected. The pleas of those left in utter destruction should be ignored. It is their mess, they should clean it up. This is certainly the policy of the political right with regard to the Great Depression. And sadly it is what the deeds of Obama demonstrate even as his words claim the opposite.