A Long and Long Recession

They all say about the same thing: it isn’t going to be over soon. A. Michael Spence, who won the Nobel prize in economics in 2001, says we will have an unusually long and deep recession through 2010. This includes many of the countries of Europe where “banks have American-style problems with toxic assets.” Goldman Sachs has predicted a deep global recession, with worldwide gross domestic product shrinking 0.6 percent this year. The billions of dollars that have evaporated in this country will be multiplied many times over in European and Asian markets. Not just our economy, but the world economy is being reshaped.

Each day brings additional declines in the U.S. economy – some of the losses are record-setting. Many Americans are quite literally shell-shocked: their jobs gone, their savings wiped out or nearly so, and the number of homes in foreclosure unrelenting. Americans, reassured by lenders that all was well, went on a drunken binge overborrowing and overspending.

Those who whistle in the dark and say things are as bad as they are going to be, and that an upturn is just around the corner. But one need only observe that people simply aren’t buying – anything. Niall Ferguson, a professor of finance at Harvard says, “My strong suspicion is that we are now in something more like a Great Recession. It won’t produce as steep a fall in American output as the Depression did, but it may prove to be as prolonged.”

What has been proposed – and it has met with caution cynicism – are new taxes on the rich (those earning over $250,000 a year) and strict limits on tax deductions. Charitable organizations especially are already feeling the pinch. There are fewer dollars left over on payday for charitable contributions. “Payday” presupposes that the majority of Americans will remain employed. The unemployed will create a domino effect on the housing market, health care, organized labor, pension funds, and leisure activities.

I titled a recent blog, “We’re beginning to look a lot like France.” I stand corrected by Patrick Buchanan who wrote recently in Real Clear Politics, “We are not headed down the road to socialism. We are there.”

Why, then, are we being lied to and told we’re already beginning to see an upturn? It’s like losing a limb - it ain’t gonna grow back!