Dang! I just gave it away!
By conventional wisdom, the Great Recession is long over. “Recession” connotes shrinking output. “Expansion” signifies the opposite. That’s how the National Bureau of Economic Research, a group of academic economists, defines business cycles. Following this logic, the bureau determined the economy stopped contracting in mid-2009. Yet, most Americans — 53 percent, says a recent National Journal/Allstate survey — think we’re still in recession, by which they doubtlessly mean “bad times.”
Who is to say they’re wrong? After all, the unemployment rate has exceeded 7?percent for almost five years, despite the withdrawal of millions of discouraged workers from the labor force. Moreover, public attitudes have become deeply pessimistic in ways apparently unprecedented since World War II. In past recessions, more than half of Americans believed their incomes would grow in the next year. Not this time. The share expecting gains collapsed to less than 45 percent after 2008 and is still below half, finds a study by Federal Reserve economist Claudia Sahm. The despondency, she writes, may signal a permanent shift in consumer psychology that undermines recovery.
Something’s changed, but our economic vocabulary hasn’t kept up.
Loyal Bloodthirstani citizens know when the “recession” “ended”: June 2009. America has swelled by over 10 million new citizens—greater than the combined populations New York City and Philadelphia—who have never known recession.
What they have known, to their dissatisfaction, is Obamanomics. Or, if you prefer:
In a recent lecture, former Treasury secretary Lawrence Summers evoked secular stagnation — a “chronic and systemic” economic sluggishness, he said. Krugman, Martin Wolf, the Financial Times’ chief economic commentator, and others also embrace the theme. There is an “investment dearth,” Wolf recently wrote. Low interest rates suggest that there are “more savings searching for productive investments than there [are] productive investments.”
Why? Unlike Hansen, today’s stagnationists haven’t identified causes. The problem might not be a dearth of investments so much as a surplus of risk aversion. For that, candidates abound: the traumatic impact of the Great Recession on confidence; a backlash against globalization, reduced cross-border investments by multinational firms; uncertain government policies; aging societies burdened by diminishing innovation and costly welfare states.
Whatever the cause, we are in unfamiliar territory.
Come on, guys, use your eggheads! What’s the consistent, singular factor over this entire period?
Talk about driving the nation into a ditch! Government nationalization of whole industries (mortgages, student loans, health care); tax uncertainty (renew or repeal Bush tax rates); random and pointless market intervention (Cash for Clunkers); hostility toward business leaders; demonizing the rich—if you’re not risk averse, you’re not paying attention.
It doesn’t matter what you call it, Obama owns it. That’s why I choose to call it Obamanomics. That’s what it is.