Business & Economics

We’re in a one-and-a-half dip recession

Robert Reich

We’re not in a double-dip recession yet. We’re in a one-and-a-half dip recession.

Consumer confidence is down. Retail sales are down. Home sales are down. Permits for single-family starts are down. The average work week is down. The only things not down are inventories – unsold stuff is piling up in warehouses and inventories of unsold homes are rising – and defaults on loans.

The 1.5 dip recession should be causing alarm bells to ring all over official Washington. It should cause deficit hawks to stop squawking about future debt, blue-dog Democrats to stop acting like Republicans, and mainstream Democrats to get some backbone.

The 1.5 dip recession should cause the President to demand a large-scale national jobs program including a new WPA that gets millions of Americans back to work even if government has to pay their wages directly. Included would be zero-interest loans to strapped states and locales, so they didn’t have to cut vital services and raise taxes. They could repay when the economy picked up and revenues came in. The national jobs program would also include a one-year payroll tax holiday on the first $20,000 of income.

The President should stop talking and acting on anything else – not the deficit, not energy, not the environment, not immigration, not implementing the health care law, not education. He should make the whole upcoming mid-term election a national referendum on putting Americans back to work, and his jobs bill. Are you for it or against it?

But none of this is happening. The hawks and blue dogs are still commanding the attention. Herbert Hoover’s ghost seems to have captured the nation’s capital. We’re back to 1932 (or 1937) and the prevailing sentiment is government can’t and mustn’t do anything but aim to reduce the deficit, even though the economy is going down.

There will be an extension of unemployment benefits. (If it weren’t for the human suffering involved, I wish the Republicans had been forced to filibuster that bill all summer and show the nation just how much they care about people without jobs.) But the fiscal stimulus resulting from this will be tiny. Jobless benefits are humane but they alone don’t get jobs back.

And what about the Fed? It’s the last game in town. The 1.5 dip recession should cause Ben Bernanke to revert to buying mortgage-backed securities, buying Treasury bills, buying anything that will get more money into circulation.

But the Fed chair continues to talk about pulling money out of the system and raising short-term rates as the economy improves. During Wednesday’s appearance before Congress he made it clear monetary policy won’t be loosened; it just won’t be tightened for a while. And he reiterated that deficits were “unsustainable.”

He admitted unemployment would probably remain high for a long time, and the likelihood of growth was “weighted to the downside,” which in Fed-Speak means we’re still in trouble. And he said the Fed still has the tools to do what’s needed if the economy needs more help.

But would he use the tools now? No. “We need to look at them carefully to make sure we’re comfortable with any steps that we take.” This is like the captain of the Titanic looking carefully at his lifeboats to make sure he’s comfortable with using them as the ship starts sinking.

Cross-posted from Robert Reich’s blog.

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Comments to "We’re in a one-and-a-half dip recession":
    • ole nielsen

      I don’t understand the national jobs program there will include a one-year payroll tax holiday on the first $20,000 of income.
      Will millions of Americans get back to work ? i don’t think so.


      [Report abuse]

    • WilliamS

      This morning on KRCB, I watched an amazing story of survival during the Depression and the story behind the CCC camps and how it helped our struggling nation regain its footing.

      My father spoke very highly of the CCC and its accomplishments and what an impact it had on his life. During my travels across the United States there are signs in many American cities, national parks on bridges, paths and stairs stating built by the CCC.

      The infrastructure of our nation is falling apart, note the sink holes and bursting dams and flooding cities, this would an excellent time to restore the CCC.

      [Report abuse]

    • Jo

      Small business are going to be bureaucratized. $600 transaction receipts to the feds are going to be mandatory. this will disrupt the small business and certain precious medal industries that like to stay anonymous in transactions. Maybe Obama will go for the gusto and demand radio -transaction chips into our wrists or foreheads so that each transaction, now paperless, will go directly to the feds for total control. This way if the feds do not like you, or your business, they turn off your purchasing power by turning off your chip-implant. Maybe UCBerkeley is already working on this technology as we speak. Obama promised prosperity and a better economy than Bush’s 4.7 average unemployment. He convinced everyone who voted for him claiming Republicans are all failures.

      [Report abuse]

    • Anthony St. John

      It’s worse than counting dips, Krugman just exposed the GOP’s dominant cultural values in “Addicted to Bush” about GOP rapture from continuing Bush’s tax cuts and their Iraq war:
      http://www.nytimes.com/2010/07/23/opinion/23krugman.html?partner=rssnyt&emc=rss

      Thus, the new GOP motto is “We Hope America Fails” as long as GOP special interests keep getting richer and more powerful from the GOP’s perpetuation of the Decline and Fall of American Democracy, regardless of how many American Heroes die in GOP wars and no matter how many more Americans fall into GOP poverty hell.

      [Report abuse]

    • Elbise

      As of matter of fact, I recently e-mailed the CEA via their website suggesting that they create a Work Project Information Service (WPIS) using existing unused stimulus funds. While the old WPA concentrated on contruction projects, the WPIS would concentrate on building a database across the country using computers, barcodes, and scanners.

      [Report abuse]

    • Mark D.

      As of matter of fact, I recently e-mailed the CEA via their website suggesting that they create a Work Project Information Service (WPIS) using existing unused stimulus funds. While the old WPA concentrated on contruction projects, the WPIS would concentrate on building a database across the country using computers, barcodes, and scanners. E.g., every sign you see on an interstate would be barcoded and filed in the national database. Even more bseides. Sure, it means an outlay into technology, but the human inteface is worth it. And it adds value to society for years to come, q.v. CCC projects.

      [Report abuse]

    • Anthony St. John

      Excellent update about Washington mentality Robert ‘“We need to look at them carefully to make sure we’re comfortable with any steps that we take.” This is like the captain of the Titanic looking carefully at his lifeboats to make sure he’s comfortable with using them as the ship starts sinking.’

      Actually, they’re feel the must first determine whether 1.5 should be rounded down to a simple value of 1 they can all understand, or god forbid up to 2, so they’ll have to appoint committees first, then figure out if anyone really cares, while the republicans will continue in their “We Hope Obama Fails” mode that they are making sure happens.

      Nothing has changed with the Washington culture since you left the White House, except somehow the rich and powerful continue to get richer and more powerful regardless of how hellacious the consequences are to normal people.

      [Report abuse]

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