Apparently we've been in a recession for a year now, as AP reports:
[T]he National Bureau of Economic Research, a group of academic economists, concluded Monday that the country has been suffering through a recession since December 2007 . . .The economy jolted into reverse in the final three months of last year. After a short spring rebound, it contracted again in the summer. Economists say it is still shrinking and will continue to do so through at least the first quarter of next year.
And that news help lead the Dow to drop over 600 points today. Happy Holidays!
So, what can we do to get out of this recession?
According to Amity Shlaes writing in the Wall Street Journal, it's definitely not the New Deal model, despite what some are saying:
The New Deal is Mr. Obama's context for the giant infrastructure plan his new team is developing. If he proposes FDR-style recovery programs, then it is useful to establish whether those original programs actually brought recovery. The answer is, they didn't. New Deal spending provided jobs but did not get the country back to where it was before. The New Deal did not encourage private enterprise to grow, it simply grew government. And it didn't do much to help unemployment: [Studies] show one man in four was unemployed when Roosevelt took office. They show joblessness overall always above the 14% line from 1931 to 1940. Six years into the New Deal and its programs to create jobs or help organized labor, two in 10 men were unemployed. So why did the Depression last so long and employment never improve much? What kept the picture so dark so long? Deflation for one, but also the notion that government could engineer economic recovery by favoring the public sector at the expense of the private sector. New Dealers raised taxes again and again to fund spending. The New Dealers also insisted on higher wages when businesses could ill afford them. Roosevelt, for example, signed into law first his National Recovery Administration, whose codes forced businesses to pay an above-market minimum wage, and then the Wagner Act, which gave union workers more power. As a result of such policy, pay for workers in the later 1930s was well above trend. Mr. Ohanian's research documents this. High wages hurt corporate profits and therefore hiring. The unemployed stayed unemployed. "If you had a job you were all right" -- the phrase we all heard as children about the Depression -- really does capture the period. In other words, high taxes and artificially high wages lowered corporate profit. And without corporate profit, business couldn't expand and create private sector jobs. And the government can't create enough jobs to employ everyone. And, unfortunately, the New Deal model is exactly what the Democrats and Obama administration want to try with their billions of dollars of stimulus and giving unions more power. So get ready for a long, protracted recession. Or dare I say Depression II.
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