The recession began, according to the National Bureau of Economic Research, in December 2007.
While this is not exactly earth shattering news, I’ve got asubject for debate:
What’s the best way to stimulate the economy out of it?
I swear some Doper, just last weekend, wrote that we were nearly at full employment. If someone wants to continue to claim that things are actually just dandy, be my guest.
I’m for a middle class tax cut, for immediate and continuing stimulus, and major infrastructure improvement, to spend some money on something of value, myself.
The unemployment rate is currently 6.5% (so says the Bureau of Labor Statistics) http://www.bls.gov/CPS/
That doesn’t mean things are ‘just dandy’ but it does mean that the unemployment rate is not that high. Maybe the statistics just haven’t caught up with the reality yet.
Ya THINK so? Yeah, it’s the worst it’s been since the last DEpression (that word doesn’t get a used a lot for obvious reasons, but those I know who lived through it think it is more appropriate that REcession right about now)
I’m on unemployment for the first time in my life (at 42) and been seeking employment for a few mths with nada, ziltch, zero success. My resume is NOT too shabby, btw. Never ever had any issues finding work before.
I have decided to go back to school full time and finish/upgrade my degree. Just because I can’t seem to get a job so I might as well do something productive and better position myself for employment when things open back up. (and ok, to be honest, I find myself at a crossroads and not really wanting to go back to work, but wanting a change of course. Good a time as any! That worked out well;)
But seriously, I know a LOT of people who are hurting bad lately. If I didn’t have SS income due to my spouse’s death, the kids and I would be on the street by now. It’s bad.
Out of curiosity, which parts were amusing? After all, we didn’t know if we were in a recession or not at that time (though I have to say that this was one of the few times I was actually right in a prediction :p).
I’d have to see the quote (whoever thinks things are ‘just dandy’ right now is delusional…but maybe you are remembering out of context or something?). However, unemployment is still relatively low…though my own prediction (and I don’t think you need to be Nostradamus here to see this) is that unemployment is going to go up in the next year or so.
I vote for a balanced budget with a modest tax increase across the board, a move to un-entangle us in our various foreign adventures and a serious effort at some real fiscal conservatism. I’m guessing you will get your wish though as this is one of the things Obama has promised…though lately he’s (well, his team) has kind of been making noises about postponing some of that kind of thing for a few years, until the country gets back on it’s feet economically speaking.
The people knew we were in a recession. The politicians have ways to define them away. Lets find some technical way of making it go away. Some indicator did not drop 2 quarters in a row. All is well.
It’s not politicians who define what a recession is (or isn’t), it’s economists, gonzo. And the fact was at the time of the other thread we simply didn’t know if we were or weren’t officially in a recession…though to me the writing was on the wall at that point. Still, it was only a guess, and different economists were saying different things.
The key in an economy based largely on consumer spending as the US economy is is to free up money for the poor, working poor, and middle class. Give THEM the tax breaks and bail-outs, and they will spend it and stimulate the economy.
Screw kickbacks to the rich…they just sock it away on top of the rest of their savings. And they are a very small percentage regardless.
We could easily get out of this “recession” by distributing 700 billion to all those earning less than 50 grand per yr.
Yay! Let’s spend our way to prosperity! It’s the Boomer way.
Right now, the government’s plan should be to spend enough money to keep the economy from completely collapsing and the banking system from drying up, and not a penny more. Money doesn’t grow on trees. Any money you spend by giving the poor and middle class money to throw a party with is money you have to tax from the people who actually make the party goods. Taxing producers to stimulate consumption is one of the stupidest ideas to ever take hold in the name of ‘stimulus’.
As for infrastructure spending, this economy will either be on the way to recovery or fully cratered before you could even get through the environmental impact statements. Throwing money at infrastructure right now is worse than useless - it will divert professionals from the work they are doing now and put them into jobs doing make-work projects. The employment created through infrastructure spending is not in areas where there are currently serious employment problems. You’re not going to put ex-UAW people to work paving roads or building bridges.
What the hell good does a tax cut do me when I’m not earning enough to pay taxes?
I haven’t had steady work in over a year, despite a willingness to work my butt off, and more applications and resumes submitted than I want to think about.
Right now I’d give my eye-teeth for even a “make work” job and to hell with being a professional. Being an unemployed professional does not put a roof over my head or food on my table.
I’m sorry, Sam, but I don’t think you get it - there are a LOT of professionals right now who aren’t doing work, whose unemployment has run out, and who need some income.
It’s the Keynesian way, which happens to be the way preferred by the clear majority of professional economists. From Greg Mankiw, former chair of W’s council of economic advisers:
The debate among the pros is not whether to have a stimulus, which is pretty much settled, but only how big it should be.
I am continually amazed that so many people who claim to prefer to look at things in an economic mindset don’t actually understand what mainstream economics teaches us about severe recessions/depressions. For one, it’s a total fabrication that we’d be taxing “producers”. That’s not true in the slightest. We’d be taxing our children. That’s not pretty, either, but we are quite possibly looking at a choice between giving the kiddies a good economy with more debt, or giving them a disaster, an indefinitely stagnant economy that is stuck on a new equilibrium output level much lower than the potential maximum output level. For that reason alone, there is no justification for claiming that this crisis will either solve itself soon or will crater the economy. Japan suffered a whole “Lost Decade” of stagnation when they failed to institute the full stimulus that they’d originally planned.
And just for the record, the primary point of a Keynesian stimulus is not to lower the unemployment rates in individual sectors of the economy. It’s to forcibly inject some velocity into the system to get goods and services moving again, which will push the economy out of its stagnant equilibrium and up toward its “natural” level, which will cause unemployment in all sectors to drop back down to their own natural levels. And there’s a lot of benefits to be gained from infrastructure improvements. There are plenty of good worthwhile projects, the likes of which governments are supposed to handle (e.g. keeping bridges from collapsing) that have sometimes been ignored. We might as well take care of some of them when we’re doing this stimulus, especially given their long-term benefits and the fact that they fit the stimulus perfectly since they’re large one-time costs.
This is not a typical recession caused by the business cycle - the type of recession a Keynesian pump was designed to combat. This is a ‘Balance Sheet’ recession, of the type Japan experienced in the 1990’s. The collapse of the housing bubble left many businesses and individuals with unsustainable debt loads, and the result is a contraction as everyone turns to savings and cutting spending in order to correct their balance sheets.
What happened to the last ‘stimulus’? Answer: It was absorbed by the public and saved or used to pay down debt - not spent in the general economy. The last ‘stimulus’ had a much smaller effect than was predicted because of this.
Keynes saw taxing more and saving in the good times, and spending more in the bad times, as a way to flatten the business cycle. The problem with that, of course, is that governments rarely save during the ‘good times’. When times are good and coffers are full, the government spends more money because it has it. Then when times get tough, the government spends more money as a ‘stimulus’. That is unsustainable.
So here we are, trying to correct our balance sheets by restraining ourselves from spending wildly and by putting our paychecks and profits into debt reduction - a necessary correction. And what’s the government going to do? Thwart us by spending huge amounts of money to make up for the money we save. So we’re now just transferring the debt load onto the government. A debt load which is already nearing dangerous levels.
This party will not end well. The ‘stimulus’ wil distort the economy, push investment into areas it otherwise wouldn’t go, and divert resources from productive business to non-productive makework projects. Let’s just hope the U.S. doesn’t wind up like Iceland or New Zealand, but I’m not betting against it.
Sam, what you’re not taking into account on infrastructure projects is that the states have a metric buttload of pending projects to repair and upgrade existing systems that there’s simply no money for. Never mind permitting new projects; there’s a desperate need for funds to carry out urgently needed work that’s ready to go.
That’s just one part of the needs and funding gaps discussed in a report entitled: Transportation Finance in Massachusetts: An Unsustainable System: Findings of the Massachusetts Transportation Finance Commission which was published on March 28, 2007. Since then the state’s financial condition has greatly worsened, as the economy’s contraction has slashed tax revenues.
ETA: These projects aren’t makework; they’re desperately needed to shore up stuff we already have in service on which millions of people depend every day. The Longfellow Bridge over the Charles River in Boston, for example, a major piece of infrastructure, has had to be shut down periodically for public safety in the last year.
First, unemployment is rising rapidly. Second, there is already a large pool (I think over 10%) of those out of work. It is clearly getting worse. I can search for those who said the economy was fine during the election - I believe Sam said things were actually far better than the media made out. Gramm economics.
it would have been nice to have had a balanced budget when times were good, but that’s water under the Bush now. How would you propose balancing the budget? Increased taxes? Cutting social services or the military? Remember FDR tried this - with program cuts and tax increases - in 1937 and pushed the economy right back into depression. This isn’t the time for tax increases, and it isn’t the time to reduce government insertion of money into the economy.