Economy > Depression > Recovery
improving economy USA
USA > National Industrial Recovery Act NIRA
Following the enactment
of the the National Industrial
Recovery Act (NIRA),
the National Recovery
was established on June 16, 1933
in an effort
by President Franklin D. Roosevelt
to assist the nation's
during the Great Depression.
The passage of NIRA ushered in
a unique experiment
in U.S. economic history -
the NIRA sanctioned, supported,
and in some cases,
enforced an alliance of industries.
The National Recovery
a separate executive order,
was put into operation soon
after the final approval of the act.
to make voluntary agreements
dealing with hours of work,
rates of pay,
and the fixing of prices.
were made to the public,
and firms were asked
to display the Blue Eagle,
an emblem signifying NRA
UK > John Major > "green shoots of recovery"
economic recovery boom
job recovery USA
cartoons > Cagle > Recovery
housing recovery USA
Killing the Recovery
The New York Times
The world has
barely dug out of recession and the global economy is again slowing dangerously.
Most leaders seem eager to make things even worse.
Instead of looking for ways to reignite growth, Europe’s leaders — and
Republicans on Capitol Hill — are determined to slash public spending. Europe’s
fixation on austerity is also compounding its debt crisis, bringing the
Continent even closer to the brink. Meanwhile, China’s government, which is
struggling to contain inflation without letting its currency rise, has been
trying to slow domestic demand, allowing its trade surplus to balloon.
Each of these policies is wrong. In combination, they are likely to tip the
world into a deep recession.
The International Monetary Fund has cut its forecast for global growth this year
to 4 percent, from the 4.3 percent it had forecast in April. It expects rich
countries to grow by only 1.6 percent. That may be too optimistic.
The I.M.F. forecasts that the United States will grow by 1.5 percent this year
and 1.9 percent in 2012. But that assumes Congress will continue payroll tax
cuts and extended unemployment insurance, as President Obama has called for.
Mark Zandi of Moody’s Economy.com warns that if Congress fails to do so, the
country will probably slip into recession.
Europe is in even worse shape. Rich nations that could afford to spend more to
increase growth, like Germany and Britain, are instead slashing spending.
Germany and its rich neighbors are also insisting that Greece, Portugal and
other debtor countries accept even stiffer doses of austerity to regain the
confidence of investors. Sending these economies into near collapse means that
they will never be able to dig out or pay off their creditors.
While the German Parliament is expected to approve a new $600 billion bailout
fund on Thursday, many European leaders already admit it is too small to deal
with turmoil that now also threatens Spain and Italy.
It is true that many countries do not have the money to pay for policies to
promote employment and growth. The United States, Britain, Germany and China
could boost global demand by spending more at home and buying more from weaker
countries that cannot stimulate their own economies.
The United States government must cut its budget deficit, but the economy must
recover first. According to Mr. Zandi, President Obama’s $450 billion jobs plan
could add 1.9 million jobs in 2012 and cut the unemployment rate by a percentage
point. With interest rates so low, the government could easily pay for a bigger
The British government has similar room to maneuver. And its stubborn insistence
on fiscal austerity is already causing havoc. But the countries that could do
most to assist global growth are China and Germany.
China today makes 14 percent of the world’s economic product but consumes only 6
percent of it. Allowing its currency to rise would help combat inflation by
lowering the domestic price of imports, while increasing the spending power of
the Chinese people.
Germany’s export model is also failing, producing little growth while sucking
demand from its neighbors. Germany could easily raise money at low cost to
stimulate its own consumption. Yet not only has it refused stimulus spending, it
is imposing austerity on the rest of Europe — forcing weak countries to contract
their economies in exchange for its aid.
Economic policy makers have made similar mistakes before. That is what caused
the Great Depression. There is not a lot of time left to get this right.
Killing the Recovery, NYT, 28.9.2011,
Across the U.S.,
Looks Like Recession
October 12, 2010
New York Times
By MICHAEL POWELL
and MOTOKO RICH
This is not what a recovery is supposed to look like.
In Atlanta, the Bank of America tower, the tallest in the Southeast, is nearly a
fifth vacant, and bank officials just wrestled a rent cut from the developer. In
Cherry Hill, N.J., 10 percent of the houses on the market are so-called short
sales, in which sellers ask for less than they owe lenders. And in Arizona, in
sun-blasted desert subdivisions, owners speak of hours cut, jobs lost and meals
at soup kitchens.
Less than a month before November elections, the United States is mired in a
grim New Normal that could last for years. That has policy makers, particularly
the Federal Reserve, considering a range of ever more extreme measures, as noted
in the minutes of its last meeting, released Tuesday. Call it recession or
recovery, for tens of millions of Americans, there’s little difference.
Born of a record financial collapse, this recession has been more severe than
any since the Great Depression and has left an enormous oversupply of houses and
office buildings and crippling debt. The decision last week by leading mortgage
lenders to freeze foreclosures, and calls for a national moratorium, could cast
a long shadow of uncertainty over banks and the housing market. Put simply, the
national economy has fallen so far that it could take years to climb back.
The math yields somber conclusions, with implications not just for this autumn’s
elections but also — barring a policy surprise or economic upturn — for 2012 as
¶At the current rate of job creation, the nation would need nine more years to
recapture the jobs lost during the recession. And that doesn’t even account for
five million or six million jobs needed in that time to keep pace with an
expanding population. Even top Obama officials concede the unemployment rate
could climb higher still.
¶Median house prices have dropped 20 percent since 2005. Given an inflation rate
of about 2 percent — a common forecast — it would take 13 years for housing
prices to climb back to their peak, according to Allen L. Sinai, chief global
economist at the consulting firm Decision Economics.
¶Commercial vacancies are soaring, and it could take a decade to absorb the
excess in many of the largest cities. The vacancy rate, as of the end of June,
stands at 21.4 percent in Phoenix, 19.7 percent in Las Vegas, 18.3 in
Dallas/Fort Worth and 17.3 percent in Atlanta, in each case higher than last
year, according to the data firm CoStar Group.
Demand is inert. Consumer confidence has tumbled as many are afraid or unable to
spend. Families are still paying off — or walking away from — debt. Mark Zandi,
chief economist of Moody’s Analytics, estimates it will be the end of 2011
before the amount of income that households pay in interest recedes to levels
seen before the run-up. Credit card delinquencies are rising.
“No wonder Americans are pessimistic and unhappy,” said Mr. Sinai. “The only way
we are going to get in gear is to face up to the reality that we are entering a
period of austerity.”
This dreary accounting should not suggest a nation without strengths.
Unemployment rates have come down from their peaks in swaths of the United
States, from Vermont to Minnesota to Wisconsin. Port traffic has increased, and
employers have created an average of 68,111 jobs a month this year.
After plummeting in 2009, the stock market has spiraled up, buoying retirement
accounts and perhaps the spirits of middle-class Americans. As a measure of
economic health, though, that gain is overstated. Robert Reich, the former labor
secretary, notes that the most profitable companies in the domestic stock
indexes generate about 40 percent of their revenue from abroad.
Few doubt the American economy remains capable of electrifying growth, but few
expect that any time soon. “We still have a lot of strengths, from a culture of
entrepreneurship and venture capitalism, to flexible labor markets and
attracting immigrants,” said Barry Eichengreen, an economist at the University
of California, Berkeley. “But we’re going to be living with the overhang of our
financial and debt problems for a long, long time to come.”
New shocks could push the nation into another recession or deflation. “We are in
a situation where our vulnerability to any new problem is great,” said Carmen M.
Reinhart, a professor of economics at the University of Maryland.
So troubles ripple outward, as lost jobs, unsold houses and empty offices weigh
down the economy and upend lives. Struggles in Arizona, New Jersey and Georgia
In 2005, Arizona ranked, as usual, second nationally in job growth behind
Nevada, its economy predicated on growth. The snowbirds came and construction
boomed and land stretched endless and cheap. Then it stopped.
This year, Arizona ranks 42nd in job growth. It has lost 287,000 jobs since the
recession began, and the fall has been calamitous.
Renee Wheaton, 38, sits in an old golf cart on the corner of Tangerine and
Barley Roads in her subdivision in the desert, an hour south of Phoenix. Her
next-door neighbor, an engineer, just lost his job. The man across the street is
Her family is not doing so well either. Her husband’s hours have been cut by 15
percent, leaving her family of five behind on water and credit card bills — more
or less on everything except the house and car payment. She teaches art, but
that’s not much in demand.
“I say to myself ‘This can’t be happening to us: We saved, we worked hard and
we’re under tremendous stress,’ ” Ms. Wheaton says. “My husband is a very
hard-working man but for the first time, he’s having real trouble.”
Arizona’s poverty rate has jumped to 19.6 percent, the second-highest in the
nation after Mississippi. The Association of Arizona Food Banks says demand has
nearly doubled in the last 18 months.
Elliott D. Pollack, one of Arizona’s foremost economic forecasters, said: “You
had an implosion of every sector needed to survive. That’s not going to get
To wander exurban Pinal County, which is where Florence is located, is to find
that the unemployment rate tells just half the story. Everywhere, subdivisions
sit in the desert, some half-built and some dreamy wisps, like the emerald green
putting green sitting amid acres of scrub and cacti. Signs offer discounts,
distress sales and rent with the first and second month free.
Discounts do not help if your income is cut in half. Construction workers speak
of stringing together 20-hour weeks with odd jobs, and a 45-year-old woman who
was a real estate agent talks of her job making minimum wage bathing elderly
patients. Many live close to the poverty line, without the conveniences they
once took for granted. Pinal’s unemployment rate, like that of Arizona, stands
at 9.7 percent, but state officials say that the real rate rises closer to 20
percent when part-timers and those who have stopped looking for work are added
At an elementary school near Ms. Wheaton’s home, an expansion of the school’s
water supply was under way until thieves sneaked in at night and tore the copper
pipes out of the ground to sell for scrap.
Five miles southwest, in Coolidge, a desert town within view of the distant
Superstition Mountains, demand has tripled at Tom Hunt’s food pantry. Some days
he runs out.
Henry Alejandrez, 60, is a roofer who migrated from Texas looking for work.
“It’s gotten real bad,” he says. “I’m a citizen, and you’re lucky if you get
Mary Sepeda, his sister, nods. She used to drive two hours to clean newly
constructed homes before they were sold. That job evaporated with the housing
market. (Arizona issued 62,500 housing permits several years ago; it gave out
8,400 last year.)
“It’s getting crazy,” she says, holding up a white plastic bag of pantry food.
“How does this end?”
You put that question to Mr. Pollack, the forecaster. “We won’t recover until we
absorb 80,000 empty houses and office buildings and people can borrow again,” he
When will that be?
“I’m forecasting recovery by 2013 to 2015,” he says.
Cherry Hill, N.J.
The housing market in this bedroom community just across the border from
Philadelphia never leapt to the frenzied heights of Miami Beach or Las Vegas.
But even if foreclosure notices are not tacked to every other door, a malaise
has settled over the market. Home prices have fallen by 16 percent since 2006,
and houses now take twice as long to sell as they did five years ago.
That’s enough to inflict pain on homeowners who need to sell because of a job
loss or drop in income. Some are being forced to get rid of their houses in
short sales, asking less than they owe on a mortgage. As of last week, 10
percent of all listings in this well-tended suburb were being offered as short
Chrysanthemums bloomed in boxes on the porch of one of those homes as a real
estate broker unlocked the front door. In the kitchen, children’s chores were
listed neatly on an erasable white board. Dinner simmered in a Crock-Pot on the
There were few signs of the financial distress that prompted the owners to put
their four-bedroom colonial on the market for less than they paid five years
The colonial’s owners, James and Patricia Furrow, bought near the top of the
market in 2005 for $289,900. Mr. Furrow, 48, retired in July after 26 years as a
corrections officer and supplements his pension with work as a handyman. But his
income is spotty, and his wife, who works in a school cafeteria, does not earn
enough to cover the mortgage on the house where they live with their three
They have already missed a payment; they want to sell the house in hopes their
lender will forgive the shortfall between their loan balance and the lower sale
price. They are asking $279,900.
“When we did buy, the market was still moving pretty good,” said Mr. Furrow.
“Then it got to the point where people said it is not going to last. And of
course it didn’t last.”
Some of the homes being offered at distressed prices are dragging down prices
for less troubled homeowners who hope to sell. And with foreclosures now in
disarray, the market could be further weakened. “Even someone who is trying to
sell a normal, well-maintained house is at the mercy of these low prices,” said
Walter Bud Crane, an agent with Re/Max of Cherry Hill.
So the houses sit, awaiting offers that rarely materialize. According to Mr.
Crane, the average number of days that homes sit on the market has nearly
doubled, to 62 this year from 32 in 2005. Buyers are chary, not sure if their
jobs are secure. Open houses draw sparse crowds.
In Camden County, where Cherry Hill sits, unemployment is near 10 percent.
Several large employers have closed or conducted huge layoffs, and others have
pruned hours. With Gov. Chris Christie reining in spending, government workers
Real estate agents say it has rarely been a better time to buy: interest rates
are at record lows, house prices have fallen and the selection is large.
Tara Stewart-Becker, a 28-year-old financial services manager, said she and her
husband would love to buy a sprawling fixer-upper just three blocks from the
narrow colonial they purchased four years ago in Riverton, which backs onto the
But a bad kitchen flood and a loan to pay for repairs has left Ms. Becker and
her husband, Eric, owing more on their mortgage than the house is currently
worth. Even though the couple make far more money than they did when they bought
their house and could afford a larger loan and renovations, they cannot sell.
“I would gladly take a new mortgage and stimulate the economy for the rest of my
life,” Ms. Becker said.
“Unfortunately, there isn’t anything that a government or a bank can do,” she
added. “You just have to settle for less and wait.”
Long fast-growing, no-holds-barred Atlanta has burned to the ground before,
figuratively and in reality, and each time it was a phoenix rising. But this
recession has cut deeper than any since the Great Depression and left Atlanta’s
commercial and high-end condo real estate in an economic coma.
Over all, assuming a robust growth rate, industry leaders say it could take 12
years for Atlanta to absorb excess commercial space.
“That one — see it?” Alan Wexler points to a gleaming blue tower as he drives.
“A Chicago bank took it over six months ago. Sold at a 40 percent discount.”
“And over there” — he juts his chin at a boarded-up hotel topped by a
Chick-fil-A fast-food restaurant crown. “That was going to be a condo. They just
shut it down and walked away.”
Mr. Wexler, a wiry and peripatetic real estate data analyst, describes it all on
a drive down Peachtree Road, Atlanta’s posh commercial spine.
He starts in the Buckhead neighborhood, which has more than two million square
feet of vacant commercial space. A billboard outside one discounted condo tower
promises “New Pricing from the $290s!” There are towers half-empty and towers in
receivership. Office buildings that once sold for $85 million now retail for $35
Approaching downtown, Mr. Wexler hits the brakes and points to an older, white
marble building. “See that one? It’s the Fed Reserve. That’s where they sit,
look, sweat and wonder: How did we get into this mess?”
That’s a question much on the minds and lips of residents.
The commercial vacancy rate in Buckhead is near 20 percent, and the Atlanta
region has added jobs only at the low end.
Mike Alexander, research division chief for the Atlanta Regional Commission,
posed the question: “When do we start to add premium jobs again?”
Lawrence L. Gellerstedt III, chief executive of Cousins Properties, sits in an
office high atop an elegant Philip Johnson tower, with a grand view of the
Atlanta commercial corridor running north. He does not see improvement on the
“We’re all wondering what gets the economy producing jobs and growth again,” he
says. “Atlanta always was the fair-haired child of real estate growth and now,
it’s ‘O.K., poster boy, you’re getting yours.’ ”
Small banks are a particular disaster, 43 having gone under in Georgia since
2008. (Federal regulators closed 129 nationally this year, up from 25 last
year.) Real estate was the beginning, the middle and the end of the troubles. In
one deal, dozens of Atlanta banks invested in Merrill Ranch, a 4,508-acre tract
of desert south of Phoenix.
The deal imploded and took a lot of banks with it.
“No one was demanding documents or reading the fine print, and mortgage banks
were fat and happy,” recalls John Little, a developer. “Well, that train
couldn’t keep running.”
He has a ringside seat on this debacle, as he sits in the office of a handsome
condo complex he built in west Atlanta. He faced price discounts so deep that he
decided to rent it instead.
Nationwide banks have no interest in lending to local developers, and the
regional banks are desperate for cash and calling in their loans.
Mr. Little got lucky; he bought out his loan and kept his property. “Most of my
generation of builders has gone under,” he said. “It’s still spiraling out of
Across the U.S., Long
Recovery Looks Like Recession,
Recession May Be Over,
but Joblessness Remains
September 20, 2010
The New York Times
By CATHERINE RAMPELL
The United States economy has lost more jobs than it has added since the
recovery began over a year ago.
Yes, you read that correctly.
The downturn officially ended, and the recovery officially began, in June 2009,
according to an announcement Monday by the official arbiter of economic turning
points. Since that point, total output — the amount of goods and services
produced by the United States — has increased, as have many other measures of
But nonfarm payrolls are still down 329,000 from their level at the recession’s
official end 15 months ago, and the slow growth in recent months means that the
unemployed still have a long slog ahead.
“We started from a deep hole,” said James Poterba, an economics professor at
M.I.T. and a member of the National Bureau of Economic Research’s Business Cycle
Dating Committee, which declared the recession’s end. “And clearly the
bounce-back has not been immediate after hitting this trough.”
The declaration of the recession’s end confirms what many suspected: The 2007-9
recession was not only the longest post-World War II recession, but also the
deepest, in terms of both job losses and at least one measure of output
The announcement also implies that any contraction that might lie ahead would be
a separate and distinct recession, and one that the Obama administration could
not claim to have inherited. While economists generally say such a double-dip
recession seems unlikely, new monthly estimates of gross domestic product,
released by two committee members, show that output shrank in May and June, the
most recent months for which data are available. Output and other factors would
have to shrink for a longer period of time before another contraction might be
Even without a full-blown double dip in the economy, the recovery thus far has
been so anemic that the job picture seems likely to stagnate, and perhaps even
get worse, in the near future.
Many forecasters estimate that output needs to grow over the long run by about
2.5 percent to keep the unemployment rate, now at 9.6 percent, constant. The
economy grew at an annual rate of just 1.6 percent in the second quarter of this
year, and private forecasts indicate growth will not be much better in the third
quarter. (The Business Cycle Dating Committee itself does not engage in
“The amount of unemployment we’ve already got and the slowness of recovery lead
to predictions that we could have 9-plus percent unemployment even through the
next presidential election,” said Robert J. Gordon, an economics professor at
Northwestern University and a committee member.
“What’s really unique about this recession is the amount of unemployment in
combination with the slowness of the recovery,” he said. “That’s just not
happened before. We had a sharp recession followed by a sharp recovery in the
1980s. And in ’91 and ’01 we had slow recoveries, but those recessions were
shallow recessions, so the slowness didn’t matter much.”
All three of these most recent recoveries have been known as jobless recoveries,
as employment growth has significantly lagged output growth. In this recovery,
the job market bottomed six months after economic output bottomed. That is still
not nearly as much of a lag as experienced after the 2001 recession, when it
took the job market 19 months to turn around after output improved.
This new pattern of jobless recoveries has led to some complaints that
employment should play a more prominent role in dating business cycles and to
criticism that a jobless recovery is not truly a recovery at all. Business Cycle
Dating Committee members have been reluctant to change their criteria too
drastically, though, because they want to maintain consistency in the official
chronology of contractions and expansions.
While all three recent recoveries have been weak for employment, the job market
has to cover the most ground from the latest recession.
From December 2007 to June 2009, the American economy lost more than 5 percent
of its nonfarm payroll jobs, the largest decline since World War II. And through
December 2009, the month that employment hit bottom, the nation had lost more
than 6 percent of its jobs.
The unemployment rate, which comes from a different survey, peaked last October
at 10.1 percent. The postwar high was in 1982, at 10.8 percent. But the
composition of the work force was very different in the 1980s — it was younger,
and younger people tend to have higher unemployment rates — and so if adjusted
for age, unemployment this time around actually looks much worse.
The broadest measure of unemployment, including people who are reluctantly
working part time when they wish to be working full time and those who have
given up looking for work altogether, also was at its highest level since World
There is some debate, though, about whether this recession was the worst in
terms of output.
Adjusted for inflation, output contracted more than in any other postwar period,
according to Robert E. Hall, a Stanford economics professor and committee
But some economists say that a better measure would be the gap between where
output is and where it could have been if growth had been uninterrupted.
“It’s definitely not as deep as 1981-82 when measured relative to the economy’s
potential growth rate,” Mr. Gordon said.
Besides employment, nearly every indicator that the committee considers
simultaneously reached a low point in June 2009, which made that month a
relatively easy selection as the official turning point, Mr. Gordon said. The
committee previously met in April but had decided that the data were
In its statement on Monday affirming the recession’s end, the bureau took care
to note that the recession, by definition, meant only the period until the
economy reached its low point — not a return to its previous vigor.
“In declaring the recession over, we’re not at all saying the unemployment rate,
or anything else, has returned to normal,” said James H. Stock, an economics
professor at Harvard and a member of the business cycle committee.
“We clearly still have a long ways to go.”
Recession May Be Over,
but Joblessness Remains, NYT, 20.9.2010,
How to End the Great Recession
September 2, 2010
The New York Times
By ROBERT B. REICH
THIS promises to be the worst Labor Day in the memory of most Americans.
Organized labor is down to about 7 percent of the private work force. Members of
non-organized labor — most of the rest of us — are unemployed, underemployed or
underwater. Friday’s jobs report from the Bureau of Labor Statistics will almost
surely show fewer new jobs created in August than the 125,000 needed just to
keep up with growth of the potential work force.
The national economy isn’t escaping the gravitational pull of the Great
Recession. None of the standard booster rockets are working: near-zero
short-term interest rates from the Fed, almost record-low borrowing costs in the
bond market, a giant stimulus package and tax credits for small businesses that
hire the long-term unemployed have all failed to do enough.
That’s because the real problem has to do with the structure of the economy, not
the business cycle. No booster rocket can work unless consumers are able, at
some point, to keep the economy moving on their own. But consumers no longer
have the purchasing power to buy the goods and services they produce as workers;
for some time now, their means haven’t kept up with what the growing economy
could and should have been able to provide them.
This crisis began decades ago when a new wave of technology — things like
satellite communications, container ships, computers and eventually the Internet
— made it cheaper for American employers to use low-wage labor abroad or
labor-replacing software here at home than to continue paying the typical worker
a middle-class wage. Even though the American economy kept growing, hourly wages
flattened. The median male worker earns less today, adjusted for inflation, than
he did 30 years ago.
But for years American families kept spending as if their incomes were keeping
pace with overall economic growth. And their spending fueled continued growth.
How did families manage this trick? First, women streamed into the paid work
force. By the late 1990s, more than 60 percent of mothers with young children
worked outside the home (in 1966, only 24 percent did).
Second, everyone put in more hours. What families didn’t receive in wage
increases they made up for in work increases. By the mid-2000s, the typical male
worker was putting in roughly 100 hours more each year than two decades before,
and the typical female worker about 200 hours more.
When American families couldn’t squeeze any more income out of these two coping
mechanisms, they embarked on a third: going ever deeper into debt. This seemed
painless — as long as home prices were soaring. From 2002 to 2007, American
households extracted $2.3 trillion from their homes.
Eventually, of course, the debt bubble burst — and with it, the last coping
mechanism. Now we’re left to deal with the underlying problem that we’ve avoided
for decades. Even if nearly everyone was employed, the vast middle class still
wouldn’t have enough money to buy what the economy is capable of producing.
Where have all the economic gains gone? Mostly to the top. The economists
Emmanuel Saez and Thomas Piketty examined tax returns from 1913 to 2008. They
discovered an interesting pattern. In the late 1970s, the richest 1 percent of
American families took in about 9 percent of the nation’s total income; by 2007,
the top 1 percent took in 23.5 percent of total income.
It’s no coincidence that the last time income was this concentrated was in 1928.
I do not mean to suggest that such astonishing consolidations of income at the
top directly cause sharp economic declines. The connection is more subtle.
The rich spend a much smaller proportion of their incomes than the rest of us.
So when they get a disproportionate share of total income, the economy is robbed
of the demand it needs to keep growing and creating jobs.
What’s more, the rich don’t necessarily invest their earnings and savings in the
American economy; they send them anywhere around the globe where they’ll summon
the highest returns — sometimes that’s here, but often it’s the Cayman Islands,
China or elsewhere. The rich also put their money into assets most likely to
attract other big investors (commodities, stocks, dot-coms or real estate),
which can become wildly inflated as a result.
Meanwhile, as the economy grows, the vast majority in the middle naturally want
to live better. Their consequent spending fuels continued growth and creates
enough jobs for almost everyone, at least for a time. But because this situation
can’t be sustained, at some point — 1929 and 2008 offer ready examples — the
bill comes due.
This time around, policymakers had knowledge their counterparts didn’t have in
1929; they knew they could avoid immediate financial calamity by flooding the
economy with money. But, paradoxically, averting another Great Depression-like
calamity removed political pressure for more fundamental reform. We’re left
instead with a long and seemingly endless Great Jobs Recession.
THE Great Depression and its aftermath demonstrate that there is only one way
back to full recovery: through more widely shared prosperity. In the 1930s, the
American economy was completely restructured. New Deal measures — Social
Security, a 40-hour work week with time-and-a-half overtime, unemployment
insurance, the right to form unions and bargain collectively, the minimum wage —
leveled the playing field.
In the decades after World War II, legislation like the G.I. Bill, a vast
expansion of public higher education and civil rights and voting rights laws
further reduced economic inequality. Much of this was paid for with a 70 percent
to 90 percent marginal income tax on the highest incomes. And as America’s
middle class shared more of the economy’s gains, it was able to buy more of the
goods and services the economy could provide. The result: rapid growth and more
By contrast, little has been done since 2008 to widen the circle of prosperity.
Health-care reform is an important step forward but it’s not nearly enough.
What else could be done to raise wages and thereby spur the economy? We might
consider, for example, extending the earned income tax credit all the way up
through the middle class, and paying for it with a tax on carbon. Or exempting
the first $20,000 of income from payroll taxes and paying for it with a payroll
tax on incomes over $250,000.
In the longer term, Americans must be better prepared to succeed in the global,
high-tech economy. Early childhood education should be more widely available,
paid for by a small 0.5 percent fee on all financial transactions. Public
universities should be free; in return, graduates would then be required to pay
back 10 percent of their first 10 years of full-time income.
Another step: workers who lose their jobs and have to settle for positions that
pay less could qualify for “earnings insurance” that would pay half the salary
difference for two years; such a program would probably prove less expensive
than extended unemployment benefits.
These measures would not enlarge the budget deficit because they would be paid
for. In fact, such moves would help reduce the long-term deficits by getting
more Americans back to work and the economy growing again.
Policies that generate more widely shared prosperity lead to stronger and more
sustainable economic growth — and that’s good for everyone. The rich are better
off with a smaller percentage of a fast-growing economy than a larger share of
an economy that’s barely moving. That’s the Labor Day lesson we learned decades
ago; until we remember it again, we’ll be stuck in the Great Recession.
Robert B. Reich, a secretary of labor in the Clinton administration, is a
professor of public policy at the University of California, Berkeley, and the
author of the forthcoming “Aftershock: The Next Economy and America’s Future.”
How to End the Great
Recession, NYT, 2.9.2010,
Not a Recovery
The New York Times
By PAUL KRUGMAN
Ben Bernanke, the Fed chairman, say in his big speech Friday in Jackson Hole,
Wyo.? Will he hint at new steps to boost the economy? Stay tuned.
But we can safely predict what he and other officials will say about where we
are right now: that the economy is continuing to recover, albeit more slowly
than they would like. Unfortunately, that’s not true: this isn’t a recovery, in
any sense that matters. And policy makers should be doing everything they can to
change that fact.
The small sliver of truth in claims of continuing recovery is the fact that
G.D.P. is still rising: we’re not in a classic recession, in which everything
goes down. But so what?
The important question is whether growth is fast enough to bring down sky-high
unemployment. We need about 2.5 percent growth just to keep unemployment from
rising, and much faster growth to bring it significantly down. Yet growth is
currently running somewhere between 1 and 2 percent, with a good chance that it
will slow even further in the months ahead. Will the economy actually enter a
double dip, with G.D.P. shrinking? Who cares? If unemployment rises for the rest
of this year, which seems likely, it won’t matter whether the G.D.P. numbers are
slightly positive or slightly negative.
All of this is obvious. Yet policy makers are in denial.
After its last monetary policy meeting, the Fed released a statement declaring
that it “anticipates a gradual return to higher levels of resource utilization”
— Fedspeak for falling unemployment. Nothing in the data supports that kind of
optimism. Meanwhile, Tim Geithner, the Treasury secretary, says that “we’re on
the road to recovery.” No, we aren’t.
Why are people who know better sugar-coating economic reality? The answer, I’m
sorry to say, is that it’s all about evading responsibility.
In the case of the Fed, admitting that the economy isn’t recovering would put
the institution under pressure to do more. And so far, at least, the Fed seems
more afraid of the possible loss of face if it tries to help the economy and
fails than it is of the costs to the American people if it does nothing, and
settles for a recovery that isn’t.
In the case of the Obama administration, officials seem loath to admit that the
original stimulus was too small. True, it was enough to limit the depth of the
slump — a recent analysis by the Congressional Budget Office says unemployment
would probably be well into double digits now without the stimulus — but it
wasn’t big enough to bring unemployment down significantly.
Now, it’s arguable that even in early 2009, when President Obama was at the peak
of his popularity, he couldn’t have gotten a bigger plan through the Senate. And
he certainly couldn’t pass a supplemental stimulus now. So officials could, with
considerable justification, place the onus for the non-recovery on Republican
obstructionism. But they’ve chosen, instead, to draw smiley faces on a grim
picture, convincing nobody. And the likely result in November — big gains for
the obstructionists — will paralyze policy for years to come.
So what should officials be doing, aside from telling the truth about the
The Fed has a number of options. It can buy more long-term and private debt; it
can push down long-term interest rates by announcing its intention to keep
short-term rates low; it can raise its medium-term target for inflation, making
it less attractive for businesses to simply sit on their cash. Nobody can be
sure how well these measures would work, but it’s better to try something that
might not work than to make excuses while workers suffer.
The administration has less freedom of action, since it can’t get legislation
past the Republican blockade. But it still has options. It can revamp its deeply
unsuccessful attempt to aid troubled homeowners. It can use Fannie Mae and
Freddie Mac, the government-sponsored lenders, to engineer mortgage refinancing
that puts money in the hands of American families — yes, Republicans will howl,
but they’re doing that anyway. It can finally get serious about confronting
China over its currency manipulation: how many times do the Chinese have to
promise to change their policies, then renege, before the administration decides
that it’s time to act?
Which of these options should policy makers pursue? If I had my way, all of
I know what some players both at the Fed and in the administration will say:
they’ll warn about the risks of doing anything unconventional. But we’ve already
seen the consequences of playing it safe, and waiting for recovery to happen all
by itself: it’s landed us in what looks increasingly like a permanent state of
stagnation and high unemployment. It’s time to admit that what we have now isn’t
a recovery, and do whatever we can to change that situation.
This Is Not a Recovery, NYT, 26.8.2010,
as the Downturn Wears On
The New York Times
By MICHAEL COOPER
businesses and governments furloughed workers this year, but Hawaii went further
— it furloughed its schoolchildren. Public schools across the state closed on 17
Fridays during the past school year to save money, giving students the shortest
academic year in the nation and sending working parents scrambling to find care
Many transit systems have cut service to make ends meet, but Clayton County,
Ga., a suburb of Atlanta, decided to cut all the way, and shut down its entire
public bus system. Its last buses ran on March 31, stranding 8,400 daily riders.
Even public safety has not been immune to the budget ax. In Colorado Springs,
the downturn will be remembered, quite literally, as a dark age: the city
switched off a third of its 24,512 streetlights to save money on electricity,
while trimming its police force and auctioning off its police helicopters.
Faced with the steepest and longest decline in tax collections on record, state,
county and city governments have resorted to major life-changing cuts in core
services like education, transportation and public safety that, not too long
ago, would have been unthinkable. And services in many areas could get worse
before they get better.
The length of the downturn means that many places have used up all their budget
gimmicks, cut services, raised taxes, spent their stimulus money — and remained
in the hole. Even with Congress set to approve extra stimulus aid, some analysts
say states are still facing huge shortfalls.
Cities and states are notorious for crying wolf around budget time, and for
issuing dire warnings about draconian cuts that never seem to materialize. But
the Great Recession has been different. Around the country, there have already
been drastic cuts in core services like education, transportation and public
safety, and there are likely to be more before the downturn ends. The cuts that
have disrupted lives in Hawaii, Georgia and Colorado may be extreme, but they
reflect the kinds of cuts being made nationwide, disrupting the lives of
millions of people in ways large and small.
HAWAII FURLOUGHS ITS CHILDREN
MILILANI, Hawaii — It was a Friday, and Maria Marte, an administrator for an
online college that caters to members of the military, should have been at her
office at a nearby Army hospital. Her daughters, Nira, 11, and Sonia, 9, should
have been in school.
Instead, Ms. Marte was sitting with a laptop in the dining room of her home in
this neatly manicured suburb of Honolulu. “Did you already send your
registration in?” she asked a client on the phone, trying to speak above the
peals of laughter coming from the backyard, where the girls were having a
water-balloon fight with some friends.
It was the 17th, and last, Furlough Friday of the year, the end of a
cost-cutting experiment that closed schools across the state, outraging parents
and throwing a wrench into that most delicate of balances for families with
children: the weekly routine
“I have to pay attention to the customers, and make sure that I’m understanding
what they need,” said Ms. Marte, 37, whose husband, Odalis, an Army major, had
been deployed in Afghanistan for nearly a year. Then she nodded at the window,
toward the girls. “But at the same time, I have to make sure that they’re not
killing each other.”
For those 17 Fridays, parents reluctantly worked from home or used up vacation
and sick days. Others enlisted the help of grandparents. Many paid $25 to $50
per child each week for the new child care programs that had sprung up.
Children, meanwhile, adjusted to a new reality of T.G.I.T. Getting them up for
school on Mondays grew harder. Fridays were filled with trips to pools and
beaches, hours of television and Wii, long stretches alone for older children,
and, occasionally, successful attempts to get them to do their homework early.
But if three-day-weekends in Hawaii sound appealing in theory, many children
said that they wound up missing school.
“I’m really not a big fan of furloughs,” said Nira Marte, a fifth grader,
explaining that she missed the time with her friends and her teacher.
Four-day weeks have been used by a small number of rural school districts in the
United States, especially since the oil shortage of the 1970s. During the
current downturn, their ranks have swelled to more than 120 districts, and more
are weighing the change.
But Hawaii is an extreme case. It shut schools not only in rural areas but also
in high-rise neighborhoods in Honolulu. Suffering from steep declines in tourism
and construction, and owing billions of dollars to a pension system that has
only 68.8 percent of the money it needs to cover its promises to state workers,
Hawaii instituted the furloughs even after getting $110 million in stimulus
money for schools.
Unlike most districts with four-day weeks, Hawaii did not lengthen the hours of
its remaining school days: its 163-day school year was the shortest in the
The furloughs were originally supposed to last two years, but the outcry was so
great — some parents were arrested staging sit-ins at the office of Gov. Linda
Lingle, a Republican — that a deal was hammered out to restore the days next
On the last furlough day, Ms. Marte toggled back and forth between her girls —
making them pizza, taking them to swim practice — and a stream of e-mails and
calls. At one point, a soldier on the mainland was interrupted when his baby
“Don’t worry, that’s fine,” Ms. Marte reassured him. “I’m in the same boat.”
A COUNTY SHUTS ITS BUS SYSTEM
RIVERDALE, Ga. — Kelly Smith was reading a library copy of “The Politician,” the
tell-all about John Edwards, as his public bus rumbled through a suburb of
Atlanta. It was heading toward the airport, where he could switch to a train to
his job downtown, in the finance department of the Atlanta Public Schools
system. But his mind was drifting.
It was March 31, the last day of public bus service. Clayton County had decided
to balance its budget by shutting down C-Tran, the bus system, stranding 8,400
daily riders. Mr. Smith, 45, like two-thirds of the riders, had no car. He
needed a plan.
“I think that what they’re doing is criminal,” Mr. Smith said as his 504 bus
filled up. “I’ll figure something out, but I see a lot of people here who don’t
have an out.”
The next morning, this is what he had figured out: a state-run express bus
stopped around three miles from his apartment in Riverdale. So Mr. Smith rose at
5, walked past the defunct C-Tran bus stop just outside his apartment complex
and hiked the miles of dark, deserted streets, many of which had no sidewalks.
“If I get hit by a car, it’s my fault,” he said as he crossed a highway. “Who
wants to start their day off like this? This is why I don’t get up and jog.”
Mr. Kelly was determined to get to the job he had landed in November, and to get
there on time. “I was out of work for two and half years, with the economic
crisis,” he said. “So the last thing I want to do is walk away from a job.”
Around the country, public transportation has taken a beating during the
downturn. Fares typically cover less than half the cost of each ride, and the
state and local taxes that most systems depend on have been plummeting.
In most places, that has meant longer waits for more crowded, dirtier and more
expensive trains and buses. But it meant the end of the line in Clayton County,
a struggling suburb south of Atlanta where “Gone With the Wind” was set and
which is now home to most of Hartsfield-Jackson Atlanta International Airport.
The county — hit hard by the subprime mortgage crisis and the wave of
foreclosures that followed — decided it could no longer afford spending roughly
$8 million a year on its bus system, which started in 2001. It hoped that some
other entity — like the state — would pick up the cost.
If the threat to shut the system down was a game of chicken, no one blinked.
Now all five bus routes are gone, and riders are trying to adjust.
Jennifer McDaniel, a hostess at a Chili’s in the airport, was forced to spend
her tax refund, and take out a big loan, to buy a car. Jaime Tejada, 36, a Delta
flight attendant, wondered why transit was so much better in the countries he
And Tierra Clark, 19, who studies dental hygiene and works five nights a week at
the Au Bon Pain at the airport, was left with an unwanted new expense. “I’ll
have to call a taxi from now on — $13.75 every night,” Ms. Clark said, as she
rode the very last C-Tran bus home.
Now there is talk of levying a new sales tax so the county can join the
Metropolitan Atlanta Rapid Transit Authority, which it voted not to join when it
was created nearly four decades ago. That could get the buses up and running
Even if that happens, though, it could be years off — too late for Mr. Smith.
After spending a carless Easter vacation trying to figure out a better way to
get to work, or even to get his groceries, he ended up quitting his first job in
two and a half years and moving just outside Dallas, where his girlfriend had
landed a job with a bank.
“A lot of people are leaving Riverdale,” he said.
LIGHTS OUT IN COLORADO SPRINGS
COLORADO SPRINGS — It was when the street lights went out, Diane Cunningham
said, that the trouble started.
Her tires were slashed, she said. Her car was broken into. Strange men showed up
on her porch. Her neighborhood had grown deserted at night, ever since four
streetlights in a row were put out on Airport Road, the street outside her
mobile home park.
That is why Ms. Cunningham, 41, and her son Jonathan, 22, were carrying a
flat-screen television out of their mobile home on a recent afternoon. “I’m
going to pawn this,” Ms. Cunningham said, “to get a shotgun.”
It is impossible to say whether the darkness had contributed to any of the
events that frightened the Cunninghams. But ever since Colorado Springs shut off
a third of its 24,512 streetlights this winter to save $1.2 million on
electricity — while reducing the size of its police force — many resident have
said that they feel less safe.
A few miles down Airport Road a 62-year-old man, Esteban Garcia, was shot to
death in April when he was robbed outside his family’s taqueria and grocery in a
parking lot that had lost the illumination of its nearest streetlight. Gaspar
Martinez, a neighboring shopkeeper, said that he believed the lack of the light
was partly to blame.
“You figure the robbers think that if it’s dark, it’s the best time to hit,”
said Mr. Martinez, 34, whose store, Ruskin Liquor, is in the same small strip
mall. Mr. Martinez said that he put more lights up outside his store after the
The police, who arrested several suspects, said that there was no indication
that the doused light had played a role in the crime — or, indeed, in any crimes
in Colorado Springs, which remains safer than most cities of its size. But this
might be a case, they said, where perception is as important as reality.
“All the sociologists have said this for years: what matters to people isn’t
really the number of reported crimes, it’s their perception of safety,” said the
city’s police chief, Richard W. Myers. “And let’s say we don’t see any bump in
crime — that would be a good thing. But people don’t feel as safe. They’re
already telling us that, even if the numbers don’t bear that out. So do we have
a problem? I think so.”
Chief Myers said he worried that if law-abiding citizens stopped going out at
night or visiting parks, the city’s deserted open spaces could attract more
One of most influential policing concepts in recent years has been the “broken
windows” theory, which holds that addressing minor crimes and signs of disorder
can head off bigger problems down the road. Colorado Springs is taking a
To close a budget gap — the city’s voters, many of whom favor smaller
government, turned down a property tax increase in November, and a taxpayer’s
bill of rights makes it hard for city officials to raise taxes — Colorado
Springs has stopped collecting trash in its parks, stopped watering many medians
on its roads and reduced its police force.
The sprawling city of roughly 400,000 at the foot of Pike’s Peak — which covers
194 square miles — made national news when it auctioned off its police
helicopters. But less-heralded police cuts could have more impact: the force,
which had 687 officers two years ago, is down to 643 and dropping. At any given
time, the department estimates that there is a 23 percent chance that all units
will be busy.
So it has reduced the number of detectives who investigate property crimes, cut
the number of officers assigned to the schools and eliminated units that tracked
juvenile offenders and caught fugitives. Officers no longer respond to the scene
of most burglaries, at least if they are not in progress.
At the same time, the city joined others — from Fitchburg, Mass., to Santa Rosa,
Calif., and began turning off streetlights. Several recent studies have
suggested that streetlights help reduce crime — something residents here say is
Natalie Bartling, a new mother, could not believe it when the light outside her
home was shut off in April. Ms. Bartling, 38, had successfully lobbied for the
light five years ago after a wave of vandalism and petty thefts hit her
middle-class block. So this time she called daily until the city agreed to turn
it back on.
“When it got shut off, it was like missing something,” she said on a recent
night, standing under its glow. “Part of your life.”
Going to Extremes as the Downturn Wears On, NYT, 6.8.2010,
of Economic Anxiety
The New York Times
Re “Welcome to the Recovery,” by Timothy
F. Geithner, the secretary of the Treasury (Op-Ed, Aug. 3):
Forgive me, Mr. Geithner, if I remain skeptical. Recovering? I think a very
temporary remission is more accurate.
“We suffered a terrible blow, but we are coming back,” you say. No one I know
went anywhere. Their savings went, their investments went, their jobs went,
their homes went. And those who took them — and received obscene bonuses for
doing so — are coming back for even more.
My question is, Where are we going? We, the public, the average person upon whom
the health and well-being of the nation rests. The reality is that there are not
enough good jobs for everyone, housing prices are still far too high, lenders
are making it increasingly hard to borrow, credit card companies are still being
allowed to charge exorbitant interest and no one that I know is saving; every
penny goes to keep body and soul together.
Insecurity — financial, emotional and physical — is creating increasing health
problems, yet crucial public services, which could at least help in the short
term, are being cut to the bone.
What I have learned in the last few years is that the private sector plays fast
and loose with the public welfare, and no one seems to care. The gulf between
rich and poor is huge and getting wider every day.
Coming back? We’re still on the edge, and it’s still crumbling.
Susan A. McGregor
North Kingston, R.I., Aug. 3, 2010
To the Editor:
Re “Defining Prosperity Down,” by Paul Krugman (column, Aug. 2):
Maybe now we can finally admit that “trickle down” economics doesn’t work. We’ve
had 25 years of tax cuts (cuts in income taxes, estate taxes and capital gains
taxes) for the wealthiest Americans. The myth was that the wealthy would invest
that money in ways that would create more jobs and prosperity for the rest of
us. It’s not working, obviously.
Our return for trickling so much of our wealth upward was supposed to be good
jobs and a solid income for the middle class. Instead we’ve got the wealthy
playing hedge fund roulette on Wall Street, while one-sixth of American workers
are unemployed or underemployed.
Trickle-down policies increased the wealth gap, but didn’t create jobs. The only
time in the past decade that we’ve approached full employment was when the
middle class went into debt and spent virtually 100 percent of its income or
even more, as it did over the four years before 2008. That “mortgage and credit”
bubble taught us that the real “jobs engine” is middle-class spending.
To get our economy running again (instead of wheezing along), we need to
eliminate the Bush tax cuts, eliminate the tax break for hedge fund managers and
establish a meaningful estate tax. Keep that money out of the Wall Street
casino; invest instead in the middle class.
Hancock, N.H., Aug. 2, 2010
To the Editor:
Re “99 Weeks Later, Jobless Have Only Desperation” (front page, Aug. 3):
The story of Alexandra Jarrin’s odyssey from middle-class striver to unemployed
and homeless graphically illustrates the terrifying underside of what’s left of
the American dream.
A week after the 9/11 terror attacks, I was laid off from my position as head of
public relations at a publishing house. For the next year and a half, with
increasing desperation, I tried to claw my way back into a corporate life in
which I had thrived for nearly 20 years.
As it turns out, I was actually one of the lucky ones. My skills were
transferable to the entrepreneurial world, and I eventually started an
independent public relations firm. But what I learned from that experience is
just how far one can fall — and is allowed to fall — in the 21st-century United
There is very little safety net in this country. For those who make it, this can
still be the land of opportunity. But for those who, for whatever reason, lose
their grip on what we take for security — job, home, bank account — the drop is
very long indeed, with no one or nothing to catch you.
Sleepy Hollow, N.Y., Aug. 3, 2010
To the Editor:
In what state of callous cruelty is this country living when it can allow a
sizable number of its people to live in cars or on the streets because their
unemployment has run out during this long and protracted recession — all while
it still manages to send expensive armaments halfway around the world?
Should we start a citizens’ emergency fund, or a clearinghouse where people can
donate available housing, or a sponsorship program where you can help someone
for six months, since the government does not seem to have the will to do any of
Forget about will, how about heart? Where is it?
Shameful, shameful, shameful.
Bridport, Vt., Aug. 3, 2010
To the Editor:
Re “Four Deformations of the Apocalypse,” by David Stockman (Op-Ed, Aug. 1):
During the past 30 years in which Republicans largely dominated the White House
and Congress, these so-called conservatives have mortgaged our country to the
brink of bankruptcy via reckless spending, borrowing from abroad and giving tax
breaks to the rich only to run up today’s obscene national debt and trigger our
current deep recession.
And when President Obama increases deficits to stimulate the moribund economy —
a strategy recommended by virtually all reputable economists — the irresponsible
Republicans have the nerve to blame his administration for our national debt.
Will the American voters see through this charade? Given our propensity to run
up personal debt to buy stuff we don’t need with money we don’t have, I fear
that the answer is no. What a legacy we are leaving future generations.
James G. Goodale
Houston, Aug. 1, 2010
To the Editor:
To David Stockman’s perceptive analysis, one must add the basic Republican
financial strategy dating back at least to Ronald Reagan: Pushing up the deficit
makes it difficult or impossible for the Democrats to finance, increase or
develop programs disfavored by Republicans. It’s that simple.
The Republican arguments for deficit reduction fly in the face of fact, as the
Bush administration’s policies so clearly show. “Tax and spend” Democrats have
been upstaged by “spend and don’t tax” Republicans. The cynicism exceeds
Big Sandy, Mont., Aug. 1, 2010
Still in the Time of Economic Anxiety, NYT, 4.8.2010,
Welcome to the Recovery
The New York Times
By TIMOTHY F. GEITHNER
THE devastation wrought by the great recession is still all too real for
millions of Americans who lost their jobs, businesses and homes. The scars of
the crisis are fresh, and every new economic report brings another wave of
anxiety. That uncertainty is understandable, but a review of recent data on the
American economy shows that we are on a path back to growth.
The recession that began in late 2007 was extraordinarily severe, but the
actions we took at its height to stimulate the economy helped arrest the
freefall, preventing an even deeper collapse and putting the economy on the road
From the start, President Obama made clear that recovery from a crisis of this
magnitude would not come quickly and that the recovery would not follow a
straight line. We saw that this past spring, when the European fiscal crisis
posed a serious challenge to the markets and to business confidence, dampening
investment and the rate of growth here.
While the economy has a long way to go before reaching its full potential, last
week’s data on economic growth show that large parts of the private sector
continue to strengthen. Business investment and consumption — the two keys to
private demand — are getting stronger, better than last year and better than
last quarter. Uncertainty is still inhibiting investment, but business capital
spending increased at a solid annual rate of about 17 percent.
Together, private consumption and fixed investment contributed about 3.25
percent to growth. Even the surge in imports, which lowered the rate of increase
of G.D.P., actually reflects healthy and growing American demand.
As the economists Ken Rogoff and Carmen Reinhart have written, recoveries that
follow financial crises are typically a hard climb. That is reality. The process
of repair means economic growth will come slower than we would like. But despite
these challenges, there is good news to report:
• Exports are booming because American companies are very competitive and lead
the world in many high-tech industries.
• Private job growth has returned — not as fast as we would like, but at an
earlier stage of this recovery than in the last two recoveries. Manufacturing
has generated 136,000 new jobs in the past six months.
• Businesses have repaired their balance sheets and are now in a strong
financial position to reinvest and grow.
• American families are saving more, paying down their debt and borrowing more
responsibly. This has been a necessary adjustment because the borrow-and-spend
path we were on wasn’t sustainable.
• The auto industry is coming back, and the Big Three — Chrysler, Ford and
General Motors — are now leaner, generating profits despite lower annual sales.
• Major banks, forced by the stress tests to raise capital and open their books,
are stronger and more competitive. Now, as businesses expand again, our banks
are better positioned to finance growth.
• The government’s investment in banks has already earned more than $20 billion
in profits for taxpayers, and the TARP program will be out of business earlier
than expected — and costing nearly a quarter of a trillion dollars less than
projected last year.
We all understand and appreciate that these signs of strength in parts of the
economy are cold comfort to those Americans still looking for work and to those
industries, like construction, hit hardest by the crisis. But these economic
measures, nonetheless, do represent an encouraging turnaround from the
frightening future we faced just 18 months ago.
The new data show that this recession was even deeper than previously estimated.
The plunge in economic activity started an entire year before President Obama
took office and was accelerating at the end of 2008, when G.D.P. fell at an
annual rate of roughly 7 percent.
Panicked by the collapse in demand and financing and fearing a prolonged slump,
the private sector cut payrolls and investment savagely. The rate of job loss
worsened with time: by early last year, 750,000 jobs vanished every month. The
economic collapse drove tax revenue down, pushing the annual deficit up to $1.3
trillion by last January.
The economic rescue package that President Obama put in place was essential to
turning the economy around. The combined effect of government actions taken over
the past two years — the stimulus package, the stress tests and recapitalization
of the banks, the restructuring of the American car industry and the many steps
taken by the Federal Reserve — were extremely effective in stopping the freefall
and restarting the economy.
According to a report released last week by Alan Blinder and Mark Zandi,
advisers to President Bill Clinton and Senator John McCain, respectively, the
combined actions since the fall of 2007 of the Federal Reserve, the White House
and Congress helped save 8.5 million jobs and increased gross domestic product
by 6.5 percent relative to what would have happened had we done nothing. The
study showed that government action delivered a powerful bang for the buck, and
that the bank rescue on its own will turn a profit for taxpayers.
We have a long way to go to address the fiscal trauma and damage across the
country, and we will need to monitor the ups and downs in the economy month by
month. The share of workers who have been unemployed for six months or more is
at its highest level since 1948, when the data was first recorded, and we must
do more to ensure that they have the skills they need to re-enter the
21st-century economy. Small businesses are still battling a tough climate. State
and local governments are still hurting.
There are urgent tasks to be undertaken to reinforce the recovery, and Congress
should move now to help small business, to assist states in keeping teachers in
the classroom, to increase investments in public infrastructure, to promote
clean energy and to increase exports. And while making smart, targeted
investments in our future, we must also cut the deficit over the next few years
and make sure that America once again lives within its means.
These are considerable challenges, but we are in a much stronger position to
face them today than when President Obama took office. By taking aggressive
action to fix the financial system, reduce growth in health care costs and
improve education, we have put the American economy on a firmer foundation for
And as the president said last week, no one should bet against the American
worker, American business and American ingenuity.
We suffered a terrible blow, but we are coming back.
Timothy F. Geithner is the secretary of the Treasury.
Welcome to the Recovery, NYT, 2.8.2010,
Hopeful Signs for Factories
September 13, 2009
The New York Times
By PETER S. GOODMAN
MEQUON, Wis. — At the Rockwell Automation factory here,
something encouraging happened recently that might be a portent of national
economic recovery: managers reinstated a shift, hiring a dozen workers.
After months of layoffs, diminished production and anxiety about the depths of
the Great Recession, the company — a bellwether because most of its customers
are manufacturers themselves — saw enough new orders to justify adding people.
Given the panicked retreat that has characterized life on the American factory
floor for many months, any expansion registers as a hopeful sign for the
economy. Last week, the Federal Reserve found signs of “modest improvement” in
manufacturing. That reinforced the direction of a widely watched manufacturing
index tracked by the Institute for Supply Management, which surged into positive
territory last month for the first time in a year and a half.
Yet these indications, while welcome, promise no vigorous expansion: For now,
factory overseers remain uncertain that a lasting resurgence is at hand, making
them reluctant to hire workers aggressively and invest in new equipment.
“We’re starting to see stabilization,” said Keith D. Nosbusch, chairman and
chief executive of Rockwell, which makes machinery used in manufacturing. “The
deceleration is slowing, but we haven’t seen the bottom yet. We have yet to see
The tentative signs of factory improvement largely reflect a replenishing of
inventories after months of weak sales, rather than an increase in demand for
goods. For manufacturing to return to strength and help power a broader economic
recovery, consumers would have to start buying more products, experts say.
Still, the mere process of expanding inventories could be enough to sustain
several months of increased production, say economists. That could eventually
generate more factory jobs, giving workers money to spend at other businesses.
And that might instill enough momentum for a broader economic expansion.
“After one of the most incredible cutbacks and slicing away ever, just
replenishing inventories is sufficient to maintain increased output,” said Allen
Sinai, chief global economist at Decision Economics. “It’s part of the process
of recovery in the United States, which is imminent.”
On Wall Street and in academic circles, where economists pick through often
contradictory indicators for evidence of revival, the situation inside American
factories is of crucial interest. Though manufacturing has diminished as a share
of the economy, it still employs 11.7 million people, and it tends to trace the
ups and downs of broader business prospects, making it a useful indicator of
overall economic vigor.
The recent manufacturing data has been seized on by many economists as a signal
that the recession is, technically speaking, already over or nearing an end.
“Those are genuine signs that this economy has turned the corner and begun to
recover,” said Bernard Baumohl, chief global economist at the Economic Outlook
However, for now, growth in manufacturing jobs is mostly just a hope. Though
improved business prospects appear to have tempered layoffs, manufacturing lost
65,000 net jobs in August, according to the Labor Department, adding to more
than 2 million jobs in the sector that have disappeared since the recession
“None of these factories are yet convinced that this is a sustainable recovery,
so they’re very cautious about hiring,” said Mr. Baumohl.
Wisconsin is an ideal laboratory in which to assess manufacturing. No other
state has a larger share of its jobs in manufacturing — more than 17 percent,
according to the Labor Department. Today, that translates into a palpable lack
At the original Miller brewery in downtown Milwaukee — now a tiny piece of a
mammoth operation that produces more than 100 million cases of beer annually —
roughly 25 of the 550 workers who labor for hourly wages typically leave the
company in the course of a year. This year, the number is zero.
“It used to be you might leave here and go over there for a higher-paying job,”
said Andrew K. Moschea, a brewing vice president for Miller Coors. “ ‘Over
there’ isn’t there anymore, or it’s laying off.”
The Miller plant is a bright spot in the local economy. Though production of
kegs of beer is down a little, reflecting business at restaurants and bars,
lower-priced cans are up, making for expanded volume.
When Miller recently hired 30 part-time workers to round out its weekend shifts,
paying more than $20 an hour, thousands applied, many from skilled trades that
once paid twice as much.
Rockwell Automation’s machinery, computer software and know-how form the guts of
assembly lines in a wide array of industries.
“The products they produce through the whole range are critical for doing
manufacturing,” said John S. Heywood, an economist at the University of
In recent months, Rockwell has suffered along with much of American industry. As
car sales plummeted, automakers canceled new orders for Rockwell’s machinery. As
the price of oil plunged this year, energy companies scrapped expansion plans,
eliminating demand for Rockwell’s machinery.
In recent years, Rockwell has established a presence in more than 80 countries,
deriving roughly half its revenue overseas. But as the slowdown spread to Asia,
Europe and Latin America, the comforts of being global evaporated.
As Rockwell’s customers grew fearful of losing access to credit, they eliminated
plans for new factories, idled existing plants and put off replacing and
servicing older gear. “It came quick,” Mr. Nosbusch said. “It was steep.”
Rockwell began large-scale layoffs in October 2008 — three percent of its
20,000-plus workers worldwide, including 300 in the United States. Scattered
layoffs continued in the months after. The company also cut working hours,
trimmed wages and eliminated its own contributions to employee retirement
Here in Mequon, about 20 miles north of Milwaukee, management trimmed its
production work force from about 240 to 220. It scrapped a shift in its board
shop, where workers in lab coats use sophisticated machinery to attach
capacitors, transistors and other electronics to custom-sized circuit boards.
The circuit boards are the brains of Rockwell’s power-regulating machines.
Production declined by one-fifth this year. But in recent weeks, as Rockwell has
rebuilt its inventory, production has nudged up 5 percent, prompting the
resurrection of the third shift.
Still, worry remains, making future hiring unlikely. Rockwell’s customers have
resumed replacing older gear, but have not begun full-scale expansions, which
would generate much more business.
Factory managers doubt whether American consumers — still reeling from lost jobs
and savings — can snap back vigorously enough to restore manufacturing.
“I’ve got 22 years of experience and I’ve never seen anything like this,” said
Mike Laszkiewicz, 48, vice president and general manager of Rockwell’s power
control business. “This is a tough one. I’m a little uncertain which way this is
going to go.”
In Wisconsin, Hopeful
Signs for Factories, NYT, 13.9.2009,
GDP Dip Smaller Than Expected
July 31, 2009
Filed at 9:30 a.m. ET
The New York Times
By THE ASSOCIATED PRESS
WASHINGTON (AP) -- The economy sank at a pace of just 1
percent in the second quarter of the year, a new government report shows. It was
a better-than-expected showing that provided the strongest signal yet that the
longest recession since World War II is finally winding down.
The dip in gross domestic product for the April-to-June period, reported by the
Commerce Department on Friday, comes after the economy was in a free fall,
tumbling at 6.4 percent pace in the first three months of this year. That was
the sharpest downhill slide in nearly three decades.
The economy has now contracted for a record four straight quarters for the first
time on records dating to 1947. That underscores the grim toll of the recession
on consumers and companies.
Many economists were predicting a slightly bigger 1.5 percent annualized
contraction in second-quarter GDP. It's the total value of all goods and
services -- such as cars and clothes and makeup and machinery -- produced within
the United States and is the best barometer of the country's economic health.
''The recession looks to have largely bottomed in the spring,'' said Joel
Naroff, president of Naroff Economic Advisors. ''Businesses have made most of
the adjustments they needed to make, and that will set up the economy to resume
growing in the summer,'' he predicted.
Less drastic spending cuts by businesses, a resumption of spending by federal
and local governments and an improved trade picture were key forces behind the
better performance. Consumers, though, pulled back a bit. Rising unemployment,
shrunken nest eggs and lower home values have weighed down their spending.
A key area where businesses ended up cutting more deeply in the spring was
inventories. They slashed spending at a record pace of $141.1 billion. There was
a silver lining to that, though: With inventories at rock-bottom, businesses may
need to ramp up production to satisfy customer demand. That would give a boost
to the economy in the current quarter.
The Commerce Department also reported Friday that the recession inflicted even
more damage on the economy last year than the government had previously thought.
In revisions that date back to the Great Depression, it now estimates that the
economy grew just 0.4 percent in 2008. That's much weaker than the 1.1 percent
growth the government had earlier calculated.
Also Friday, the government reported that employment compensation for U.S.
workers has grown over the past 12 months by the lowest amount on record,
reflecting the severe recession that has gripped the country.
Federal Reserve Chairman Ben Bernanke has said he thinks the recession will end
later this year. And many analysts think the economy will start to grow again --
perhaps at around a 1.5 percent pace -- in the July-to-September quarter. That
would be anemic growth by historical measures, but it would signal that the
downturn has ended.
Naroff said he now thinks growth in the third quarter could turn out to be much
stronger because companies will need to replenish bare-bone stockpiles of goods.
''You could get a huge swing in inventories that could create a much bigger
growth rate than anybody expects,'' he said.
If that were to happen, it's possible the economy's growth could clock in around
4 percent in the current quarter, he said.
Obama's stimulus package of tax cuts and increased government spending provided
some support to second-quarter economic activity. But it will have more impact
through the second half of this year and will carry a bigger punch in 2010,
Even if the recession ends later this year, the job market will remain weak.
Companies are expected to keep cutting payroll through the rest of this year,
but analysts say monthly job losses likely will continue to narrow.
Still, unemployment -- now at a 26-year high of 9.5 percent -- will keep rising.
The Fed says it will top 10 percent at the end of this year. Businesses will be
unlikely to boost hiring until they're certain the recovery has staying power.
In the second quarter, businesses continued to cut all kinds of spending, but
not nearly as much as they had been, one of the reasons the economy didn't
contract as much.
For instance, they trimmed spending on equipment and software at a 9 percent
pace in the second quarter, compared with an annualized drop of 36.4 percent in
the first quarter. Similarly, they cut spending on plants, office buildings and
other commercial construction at a rate of 8.9 percent, an improvement from the
annualized drop of 43.6 percent in the first quarter.
Housing -- which led the country into recession -- continued to be a drag on the
economy. Builders cut spending at a rate of 29.3 percent, also an improvement
from the 38.2 percent annualized drop reported in the first quarter.
Consumers, meanwhile, did a slight retreat in the spring.
They sliced spending at a rate of 1.2 percent in the second quarter, after
nudging up purchases at a 0.6 percent pace in the first quarter. It turns out
that consumers didn't nearly have the appetite to spend in the first quarter as
the government previously thought, according to revisions released Friday.
With consumers spending less on everything from cars to clothes, Americans'
savings rate rose sharply -- to 5.2 percent in the second quarter, the highest
A return to spending by governments helped economic activity in the spring. The
federal government boosted spending at pace of 10.9 percent, the most since the
third quarter of 2008. And state and local governments increased spending at a
pace of 2.4 percent, the most since the second quarter of 2007.
An improved trade picture also added to economic activity in the spring.
Although exports fell, imports fell more, narrowing the trade gap. That added
1.38 percentage points to second-quarter GDP.
The convergence of a collapse in the housing market, a near shutdown of credit
and a financial crisis created what Bernanke and others have called a perfect
storm for the economy. Those negative forces -- the scale of which hasn't been
seen since the 1930s -- plunged the country into a recession in December 2007.
It is the longest since World War II.
Recession Eases; GDP
Dip Smaller Than Expected, NYT, 31.7.2009,
U.S. Trade Deficit
April 10, 2008
The New York Times
By MICHAEL M. GRYNBAUM
The gap between what Americans import and export unexpectedly widened in
February as domestic demand appeared to increase for automobiles and capital
The trade deficit grew 5.7 percent, to $62.3 billion, its highest reading since
November and the second consecutive month of increases. The estimate for January
was revised up to $59 billion from $58.2 billion, the Commerce Department said
The increase came as a surprise to economists who had expected the economic
downturn to suppress domestic demand for foreign goods. Instead, import sales
jumped 3.1 percent, the biggest gain in almost a year, to $213.7 billion from
$206.4 billion in January.
Americans bought up more foreign motor vehicles, clothing, household appliances
and industrial equipment.
The appetite for foreign goods even outpaced the first decline in oil imports in
nearly a year. Foreign petroleum sales fell in February, though the figure will
probably climb back in March, when the price of crude oil reached to a record
“The trend in import growth is slowing as domestic demand softens and we fully
expect a sharp correction next month,” wrote Ian Shepherdson, a London-based
economist at the forecasting firm High Frequency Economics.
Sales of exports increased 2 percent to $151.4 billion from $148.2 billion in
January. Foreign demand for motor vehicles, agricultural products and heavy
machinery all increased.
Export sales, which have advanced over the last year, were likely to bolster
again as the dollar fell to new lows against other world currencies.
Thursday’s report may not bode well for the economy as a whole. With consumer
spending on the home front falling, many economists — including those at the
Federal Reserve — have said that demand from foreign customers has propped up
the ailing American economy, keeping many businesses afloat even as the housing
slump and a weakening job market dampen domestic demand.
If imports outpace exports, that means more money may be moving out of American
businesses than coming in. But economists said the deficit would probably narrow
in coming months.
“We expect a reversal of the numbers soon as households continue grappling with
falling home prices, plunging payrolls and financial market turmoil,” wrote
Dimitry Fleming, an economist at ING Bank, in a note to clients.
U.S. Trade Deficit Grows
Unexpectedly, NYT, 10.4.2008,
Greenspan says U.S.
"on the edge" of recession
Thu Feb 14, 2008
By Anna Driver
and Eileen O'Grady
HOUSTON (Reuters) - Former U.S. Federal Reserve Chairman Alan Greenspan on
Thursday said the U.S. economy is "clearly on the edge" of a recession.
Greenspan said the economy will continue to erode until there is a stabilization
of U.S. housing prices.
"We have a long way to go" before housing prices hit a bottom, Greenspan told
energy executives at the CERA conference.
High oil prices are dragging on the economy, but the fact that they haven't done
more damage shows its resiliency.
"It's a burden now," Greenspan said. He added that it's "quite remarkable" that
the U.S. economy is "able to do reasonably well" with oil prices near historic
Crude oil futures hit above $95 a barrel on Thursday and went above $100 in
Greenspan again -- as he had last month -- said that the likelihood of the U.S.
economy going into recession was "50 percent or better."
He said the U.S. economy was growing at "stall speed."
"Stagflation is too strong a term for what we are on the edge of," Greenspan
The subprime mortgage crisis would already have put the United States into
recession if U.S. businesses weren't healthy in part as the result of years of
low interest rates, Greenspan said.
"If businesses weren't in extraordinarily good shape, I have no doubt we
wouldn't be asking if we're in a recession, but how long and how deep,"
"Obviously, they (businesses) are not pushed for credit," said Greenspan.
Banks have cut back lending and will continue tight controls on borrowing until
housing prices backed by subprime mortgages stabilize, said Greenspan.
Greenspan made his comments in response to questions by Daniel Yergin, chairman
Greenspan said he would like to see additional use of electric cars.
Nuclear power makes the "most sense" to increase U.S. power generation when all
trade-offs are weighed, he said. "We have to use nuclear," Greenspan said.
He said more discussion is needed before any "cap" is created as part of a U.S.
cap-and-trade carbon program.
A carbon cap would likely lead to lower economic activity and higher
unemployment if one were set before emissions-cutting technology is widespread,
Greenspan said he doubted that technological advances will solve the problem of
growing carbon dioxide emissions.
"If you don't have a significant amount to trade, a lot of people won't be able
to trade and won't have the energy they need," Greenspan said.
Stagflation is a period when economic growth is stagnant but when prices rise.
Recession is at least two quarters of negative economic growth.
(Additional reporting by Erwin Seba in Houston;
writing by Bernie Woodall;
Editing by Gary Hill)
Greenspan says U.S. "on
the edge" of recession,
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