The "Great Recession" has not followed any prior overall pattern, and this week’s data confirms its unique path — and that it never ended.
We are not re-entering a classic recession. The Institute for Supply Management manufacturing survey is still positive, at 50.6 in August just barely so. August sales of cars did just fine, near 12 million annualized, which is 7 percent above a year ago and roughly the same as July.
August employment numbers were flat, but we have no new wave of layoffs. New claims for unemployment insurance have been stuck near 400,000 weekly for a year. If your job is in technology, health care, most government, export trade, auto manufacturing, or other manufacturing with globally competitive wages and productivity, you’re fine. Maybe you’re even buying a car.
If you’re in direct competition with global wages, or provide services to those people, you’re in a hole with no ladder.
We can stumble forward this way, even if U.S. gross domestic product dips to negative occasionally. The limit: We cannot generate enough tax revenue to run the show, and deficits will kill us.
So next week President Obama will announce "job creation." The one thing he may have right and essentially fumbled for two years: Give total priority to economic emergency.
Franklin Delano Roosevelt’s focus is legend. Even haters of the New Deal acknowledge the energetic drive to try something new. The White House did not believe in a magic fix, but did have faith in concerted action and persistence — and sent the message to a frightened people that the president all day and every day sought to find ways help the economy, and did things.
Job creation … the Civilian Conservation Corps put shovels, axes, saws, and small paychecks in the hands of broken farmers and shopkeepers, many without food or a place to sleep. Men in suits and street shoes in the bottom of ditches had not the few dollars to buy work boots and overalls.
The Works Progress Administration’s "WPA" is stamped on sidewalks all over the Great Plains and Midwest. County courthouses all through that land were built in those years by men whose hands were already rough.
Today, we have armies of young college graduates trained in all sorts of disciplines who cannot find work, and aging boomers, too. Offering "shovel-ready" employment to them has all the wisdom and compassion of Marie Antoinette.
Next week we’ll hear of "investments" to produce jobs and repair infrastructure. Today, any money for these purposes must be borrowed, and must bring a direct durable, productive return, 1-to-1 or better.
These "investments" will not. In normal times, they are properly called pork-barrel waste. This public infrastructure approach was tested and failed in bridge-to-nowhere Japan. Education, especially German-style sophisticated apprenticeship, has a valuable place, but a long-in-the-future payout.
There are other ways. First, the "D.C. mob" must ask, "What is in the way of business?" We fell into this pit in large part because financial regulators failed to do their jobs.
Our natural reaction has been a mountain of new rules and agencies, an immobilizing barbed-wire thicket. We have also failed to examine our external competitive position, and allowed ourselves to be fleeced by trading "partners."
Neither President Obama, nor for all their free-market yammering the Republicans in Congress, have any feel for what makes business and the nation productive. Get at it.
Last, since credit and housing got us into this, our natural, pea-brained instinct has been to put a collective knee on the throat of that engine. The desire to punish, to get even, and withdraw altogether has wrecked the net worth of the American household.
On Thursday, Federal Reserve Board Governor Elizabeth Duke spoke on housing. Amazing concept! She described the situation well, but solutions …?
Reflecting the frozen state of government, she joined the proposal to put 4 million distressed homes into a rental pool to be administered by a vague public-private partnership. I can think of no better way to lose value in those homes, or to preserve their crushing weight overhanging the housing market.
Don’t do something, just sit there. Don’t rationalize a market, Resolution Trust Corp.-style, just dump it in drums of embalming fluid. Credit, Duke — credit — and housing will recover just fine, just as FNMA, FDIC, RFC, FHLB and FHA did the trick last time around.
Source: Calculated Risk Blog.
