A one-and-a-half dip recession?
We鈥檙e not in a double-dip recession yet. We鈥檙e 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 鈥� unsold stuff is piling up in warehouses and inventories of unsold homes are rising 鈥� 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鈥檛 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 鈥� 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鈥檚 ghost seems to have captured the nation鈥檚 capital. We鈥檙e back to 1932 (or 1937) and the prevailing sentiment is government can鈥檛 and mustn鈥檛 do anything but aim to reduce the deficit, even though the economy is going down.
It looks like there鈥檒l be an extension of unemployment benefits. (If it weren鈥檛 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鈥檛 get jobs back.
And what about the Fed? It鈥檚 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鈥檚 appearance before Congress he made it clear monetary policy won鈥檛 be loosened; it just won鈥檛 be tightened for a while. And he reiterated that deficits were 鈥渦nsustainable.鈥�
He admitted unemployment would probably remain high for a long time, and the likelihood of growth was 鈥渨eighted to the downside,鈥� which in Fed-Speak means we鈥檙e still in trouble. And he said the Fed still has the tools to do what鈥檚 needed if the economy needs more help.
But would he use the tools now? No. 鈥淲e need to look at them carefully to make sure we鈥檙e comfortable with any steps that we take.鈥� This is like the captain of the Titanic looking carefully at his lifeboats to make sure he鈥檚 comfortable with using them as the ship starts sinking.
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