Wednesday, June 08, 2011
Time Flies Even When You Aren’t Having Fun
There was a story on Marketplace’s podcast that gave me a new insight on the Great Recession. Perhaps it will for you too.
Halfway through a lost decade
”In theory the two measures should be the same. After all, every dollar you spend is a dollar of income to someone else. But in practice, measurements differ. Most economists are focused on the less informative measure. But the better data measuring total income show that the economy entered a recession in late 2006.
Today our Gross Domestic Product is only around the level it was at when the recession began. So if it feels like we've been in a downturn for a long time, you're right. It's been nearly five years.”
And as most of my readers know, I’ve been focused on the “lost decade” almost since I started reading Krugman. (That was way back in 2006.)
There is one other tidbit I want you to note in this piece:
”When the economy is this weak for this long, it's time for policymakers to abandon the fiction that a sick economy will heal itself.”
Not too long ago, I heard what sounded like a valid argument against Krugman’s suggestions from Larry Summers. In gist, it was that Paul Krugman was too quick to rush to extraordinary economic remedies instead of sticking with ordinary economic policies. The question you have to ask yourself now is, “Is this a normal economic event or an extraordinary one?” I think the answer is pretty obvious.
We -- as a nation -- are going to have to “do something” to get out of this mess. The economy will not cure itself. I submit, it (whatever “it” is) will have to be extraordinary. I can think of nothing more “ordinary” than the standard Republican pablum of less taxes, less regulation and less government.
The rub is, no one believes anything extraordinary (at least not in a good sense) is possible with today’s political deadlock. Everyone finds it easy to believe things could go wrong. And as we all know, confidence plays a large part in the economy. I guess that says all we need to know about our immediate future.
June 8, 2011