Steve Benen at the Washington Monthly has a post today about how “The Economy Is Coming Back To Life,” cheerleading about the one-quarter increase of a government-created number called the “Gross Domestic Product.” In fairness to Steve, who I read regularly and thoroughly respect, he is not alone is grasping at this straw.
Tell all of that good news about the “economy coming back to life” to the 530,000 people who filed new jobless claims last week, or to the 18.8% of the work force that is unemployed. Tell that to the people who are included in the record number of people whose homes were foreclosed in the same quarter that we're celebrating about. Tell that to the people whose interest rates on credit card balances which were current and being promptly paid was just raised to 30% and more. Tell that to working men and women whose hours and wages are still being reduced. Tell that to holiday retailers who are not hiring seasonal workers this year because the holiday sales forecast is, at best, “flat.”
Pulling future auto sales forward into a single month by means of a one-month subsidy and creating a down-the-road sales slump does not constitute economic growth. Creating a spike in home sales by means of a short term tax credit and low interest rates to artificially drive up prices, using the same methods that created the housing bubble in the first place, does not constitute economic growth. More than 100 banks failed so far this year and many more on the brink is not economic growth.
When I see employment rising significantly and indebtedness decreasing and a major portion of the bad debt written off; when no small banks are failing then I will believe that the economy is improving.
Yes, I know about the “jobs is a trailing indicator” thing. Jobs may be a trailing indicator when unemployment is not improving, but mostly that is a slogan trotted out by politicians to pacify the mob. Even if true, steady state unemployment is not the case here; jobs are still declining, meaning that buying power is declining, home foreclosures are still increasing, and all parts of the real economy are still in a slide.
No, I don’t think the stimulus was a failure, I think it was too small and spent on too many nickel-dime projects. The Great Depression was defeated with things like the Hoover Dam, not with trivia like one-month programs persuading people to buy cars. We are trying to solve big problems with small answers. We have 535 legislators, each of whom wants his own program to get reelected on, so we get 535 trivial projects which create small, temporary local jobs. Even major bills in Congress are nothing more than an amalgamation of small ideas.
We need big thinking, but that requires big people and all of the big people are in history, not in today’s government.