By Karl Reiner
Last month, President Obama began his second term in office under conditions somewhat improved from four years ago. Back then, the economy was contracting at 5% per year and 600,000 to 800,000 people per month were being dumped into the ranks of the unemployed.
The effects of the Great Recession show how imperfect the tools available to policymakers are. After
complex Wall Street products helped feed the sub-prime housing mess, the resulting crisis had to be met by costly Federal Reserve and Treasury actions that stemmed the slide into depression. The remedies are unpopular because in saving the economy, the government had to help a banking sector that contributed mightily to the collapse.
Although the economy has slowly improved, the nation is burdened with a $16 trillion debt. It was aggravated by the recession's impact and the stimulus plans improvised to fight it. Unemployment remains around 7.8%. There are now 134 million Americans in the labor force, about 4 million less than when the recession began.
The troublesome specter of income inequality is growing due to the shifting of resources to finance, globalization and the fact that computers and robots are eliminating jobs. The baby-boomers are retiring, the workforce is aging. Spending on pensions and health care costs could hinder plans to reduce the deficit.
The hangover effects of the Bush era tax cuts, the unfunded wars in Iraq and Afghanistan and the American people's emphasis on rights over obligations are substantial. The argument for undefined small government by conservatives and their tea party allies limits options. The resulting political gridlock forces the White House and Congress to come to agreement only at the last minute.
There are a host of festering international problems. Iran is developing a nuclear threat, Russia is antagonistic, Europe wallows in recession, the Middle East roils and Iraq's democracy is shaky. Al-Qaeda has proved to be durable; it is so active in Mali the French have intervened. Afghanistan remains unstable and Pakistan is of little help. The Mexican border has security and drug issues.
Some parts of the world are changing for the better. Nearly a billion Indians and Chinese have climbed into the middle class during the previous few years. The value of exports moving between developing countries now exceeds the value of their shipments to the developed world. In the last 20 years, the developing countries share of world trade has increased from 16% to 32%.
President Lincoln also faced problems 150 years ago. The average life expectancy in America back then was 55 years. At the start of the Civil War, cotton was the nation's largest export. The value of slaves in the South was equal to the value of the nation's railroads, banks and factories. As a wartime measure, the Emancipation Proclamation became effective in January 1863.
In May 1861, the Union army occupied the high ridge across the Potomac River in Virginia. Beginning in Virginia and running around the District of Columbia line, the Corps of Engineers constructed a system
of fortifications, making Washington the most heavily fortified city in North America. The defenses would eventually consist of 161 forts and batteries with emplacements for approximately 1,000 cannon.
The danger was real for a time. After their victory at the first battle of Manassas (Bull Run) in July 1861, the Confederates controlled a 58 mile front running from Leesburg, Virginia through Centreville to the south bank of the Occoquan River where it entered the Potomac. Confederate batteries along the Potomac shore closed the river to shipping, blockading Washington's river supply line.
The Confederates are long gone from their headquarters and fortifications in Centreville. Not far from the site of one of the Confederate forts, the Honey Pig restaurant serves a clientele of Korean expatriates, veterans and government workers. Many are discussing the consequences of the coming funding sequester. It is sign that the nation is virtually as polarized today as it was during the Civil War era.