Thursday, August 4, 2011

Krugman Confirms It: US is Not "Recovering"

Here are some bits from the latest Paul Krugman NY Times op-ed:
In case you had any doubts, Thursday’s more than 500-point plunge in the Dow Jones industrial average and the drop in interest rates to near-record lows confirmed it: The economy isn’t recovering, and Washington has been worrying about the wrong things.

It’s not just that the threat of a double-dip recession has become very real. It’s now impossible to deny the obvious, which is that we are not now and have never been on the road to recovery.

For two years, officials at the Federal Reserve, international organizations and, sad to say, within the Obama administration have insisted that the economy was on the mend. Every setback was attributed to temporary factors — It’s the Greeks! It’s the tsunami! — that would soon fade away. And the focus of policy turned from jobs and growth to the supposedly urgent issue of deficit reduction.

But the economy wasn’t on the mend.

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.
Sadly, the US is governed by one crackpot party -- the Republicans -- and timid Democrats, and a completely useless non-leader "leader", Obama. That country needs forceful personalities shouting "this way!" working hard to get the sluggish economy moving and to get people moving in the right direction.

Nope. They have a "leadership" unwilling to point out the obstructionism of the Republicans. They have Democrats in Congress that won't call the bluff of the Republicans. Sad.

Here's the bottom line:
Of course, some players won’t change. Republicans won’t stop screaming about the deficit because they weren’t sincere in the first place: Their deficit hawkery was a club with which to beat their political opponents, nothing more — as became obvious whenever any rise in taxes on the rich was suggested. And they’re not going to give up that club.

But the policy disaster of the past two years wasn’t just the result of G.O.P. obstructionism, which wouldn’t have been so effective if the policy elite — including at least some senior figures in the Obama administration — hadn’t agreed that deficit reduction, not job creation, should be our main priority. Nor should we let Ben Bernanke and his colleagues off the hook: The Fed has by no means done all it could, partly because it was more concerned with hypothetical inflation than with real unemployment, partly because it let itself be intimidated by the Ron Paul types.

Well, it’s time for all that to stop.


The point is that it’s now time — long past time — to get serious about the real crisis the economy faces. The Fed needs to stop making excuses, while the president needs to come up with real job-creation proposals. And if Republicans block those proposals, he needs to make a Harry Truman-style campaign against the do-nothing G.O.P.
Sadly, I don't expect Obama to rise to the occasion. He had a chance in January 2009 and flubbed it. After 2.5 years of pretending things were OK, I just don't expect Obama to have his "moment on the road to Damascus" and suddenly get religion.

The real horror is that the choice in 2012 is between an incompetent do-nothing Obama and some crazed Tea Party fanatic from the Republican side. There is no rational, economically-informed, economy-oriented candidate on the horizon. The US is up Shit Creek without a paddle.

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