President Bush says we are not in a recession. One commonly-used definition of a recession is two consecutive quarters of declining output (GDP). The first quarter of 2008 came in at 0.6 percent, although it would have been negative if not for inventory accumulation. So by this definition we cannot say with certainty that the recession has started, although it could well have started this quarter. Of course, for most Americans it has felt like a recession hit some time ago, with real wages flat since the end of 2002, and household income not growing for most of the six-and-a-half year economic expansion.
The National Bureau of Economic Research will eventually decide on the official onset of the recession, but even its definition is arbitrary. All the indicators of a serious recession are swirling around us. The economy has lost jobs for four months in a row, which has never happened without a recession. Consumer confidence has dropped to a 28 year low – a level not seen since Jimmy Carter was president. Home foreclosure filings are up 65 percent over last year. And now commercial real estate prices are heading south, dropping 6.2 percent in the first quarter.
With oil prices hitting record highs, and the Fed beginning to worry more about inflation, more restrictive lending practices and other fallout from the credit crunch, the near-term economic future looks even dimmer.
Some look to exports to lead the recovery, but these are only 11 percent of GDP, and consumption is about 70 percent. Still, the fall in the dollar over the last six years is helping – making our exports more competitive and reducing the subsidy that we have been giving to imports for many years. In a sign of how economic illiteracy prevails in the
We are facing the prospect of millions losing their homes, their jobs, their retirement savings, their health insurance, and their livelihoods.
This serious economic situation greatly raises the stakes of the 2008 election. What will the government do to help the victims of economic mismanagement, to provide health insurance, and to restart the economy? Is it really more important to spend billions each week on the occupation of
So far the government hasn’t done much. The stimulus package now taking effect, at about one percent of GDP and much of it likely to be saved, is quite small. The major legislation that Congress is considering for the housing crisis would mainly bail out lenders and investors while doing little for most underwater homeowners.
The voice of the people has yet to be heard on these questions in the halls of power. It had better get a lot louder, soon.
Mark Weisbrot is Co-Director of the Center for Economic and Policy Research, in Washington, D.C. (www.cepr.net).