By Karl Reiner
The Great Recession was caused by covetous bankers, slapdash regulation, a glut of cheap money and too much enthrallment with home ownership. Since peaking at 10% in 2009, the unemployment rate has been on a slow decline, unfortunately ticking back up to 8.2% in May. Chronic underemployment has been the only alternative for millions more. The housing market remains spongy; many homeowners owe more on their property than it is currently worth. The foreclosure rate remains near record levels, the nation’s home ownership rate is sliding downward.
Recent surveys reflect the consequences of the recession. Americans are down in the dumps. Only 28% of the population is satisfied with the current state of things in the country. Dissatisfaction with the current status runs high, about 70%. Depending on the locality, between 69% and 83% of Americans think the country remains in recession. Other polls show that only half of the population believes a recovery is really underway.
A survey conducted in 12 swing states found that 55% of those polled supported the notion that the jobs created so far in the recovery were of lower quality than the jobs lost in the recession. About 35% of those surveyed believe America’s best days are behind it.
By a margin of two to one, melancholy Americans expect their children’s jobs, salaries and benefits to be worse than their own.
Federal spending and debt are considered by 82 % of those polled to be as important as the unemployment problem. The federal debt is hovering around $15.7 trillion, pushed up by the recession’s debilitating impact. The government’s aggressive stimulus spending and frantic effort to patch up the financial system moderated the recession’s effect. We should not forget that it would have been a lot worse without government intervention.
Although policymakers tried hard, the slow recovery has put a big dent in America’s productive capacity and confidence. Things, however, are not quite as appalling as the polls indicate. Economists are predicting an average U.S. growth rate of over 2% for 2012 and 2013. Although not a surge, it is fairly good for an economy recovering from a major financial meltdown. After all, the recession sopped up $800 billion in stimulus spending and another $700 billion in bailouts to banks and industry as the government struggled to stabilize the situation.
The Executive Branch and Congress should be cooperating on a plan to get the debt problem under control in the medium-term. Instead, the Tea Party’s supporters in Congress maintain a rigid focus on cutting spending. Economists already know that reining in spending is less a drag on the economy than raising taxes. They also know the federal debt problem is so large that some tax increases cannot be avoided. As the members of Congress trade barbs, wary taxpayers worry about who will get stuck with paying the bill and the unsettling effect the political gridlock has on the recovery.
As did the Great Depression of the 1930s, the Great Recession has had a global impact. Growth is slowing in China, India and Brazil. In just five years, Greece’s economy has shrunk by 13%. Greece now totters on the verge of leaving the Euro. Spain has an unemployment rate of 24.1%. Its bankruptcy filings climbed by over 21% in the first quarter of 2012. Portugal and Italy are beset by a cycle of slow growth and declining competitiveness.
The crisis may have halted European integration as the risk of a Greek exit from the Euro increases. As Europe struggles to contain the damage, the euro-zone’s GDP is expected to contract in the second quarter of 2012. The unsettling economic and political repercussions bouncing around the globe will make it harder for the U.S. recovery to stay on track. If it can be maintained, a 2% U.S. growth rate will look mighty good.