Slow Motion Recession Catching Up With the States
by Texas Nate, Thu Jul 10, 2008 at 11:20:25 AM EDT
The NY Times ran a story last week on the unique circumstances of the current recession, particularly in unemployment:
Joblessness has accelerated, and employers have slashed working hours even for those on their payrolls, shrinking the size of paychecks just as workers need them the most.
That's not the unique part, but still a stark reminder of how much trouble the everyday citizen is in. What's got economists scratching their heads is the timeline:
"It's a slow-motion recession," said Ethan Harris, chief United States economist for Lehman Brothers. “In a normal recession, things kind of collapse and get so weak that you have nowhere to go but up. But we’re not getting the classic two or three negative quarters. Instead, we’re expecting two years of sub-par growth. Growth that’s not enough to generate jobs. It’s kind of a chronic rather than an acute pain.”
Great, so the US economy has arthritis, not a minor sprain or pull. Even worse is what this will mean in the future:
Goldman Sachs forecasts that the unemployment rate will peak at 6.4 percent late in 2009 before the picture improves, meaning that the painful process of shedding jobs may be only half-way complete.
Yet the President threw a temper tantrum when the idea of extending unemployment insurance was brought up. While that ended up getting passed and approved by the President, it seems as though Congress is lagging a bit in addressing the larger issues associated with the recession.
According to Congressional Daily (subscription only), Congressional leaders love the idea of a second stimulus package, they just don't have the same sense of urgency that many other folks have.
The Senate agreed to the deal on the war package after House and Senate Democratic leaders said publicly that a second supplemental was needed to take care of items that were not included in the war spending bill.
Reid reiterated those sentiments in his comments Tuesday and mentioned increasing food stamp benefits, as well as funding to improve the nation’s crumbling infrastructure as two worthy areas of investment.
“There are all kinds of problems dealing with infrastructure, food stamps, just many, many different things,” Reid said. “We have a lot of suffering going on in America today.”
Senator Reid's got it right, there is a lot of suffering going on in America today. So if we're going to take our time with a second stimulus package, let's make sure we do it right.
A great place to begin would be to listen to the National Governors Association when they meet later this week for their centennial meeting. Among other things, they will be discussing the effects of the recession on state economies.
29 of these Governors will be dealing with a combined $48 billion budget shortfall. The ones who chose to raid their rainy day funds may face even worse problems in FY 2010, and according to the previous New York Times piece, unemployment will almost certainly be a staple of the new fiscal year as well. They need help in the form of federal aid to states. Something that Senator Schumer cited as a must for the next stimulus package back in June:
"I'm speaking for myself, but I think I mirror the leadership here, to just do rebate checks again, without some more serious structural issues, to do it without, say, unemployment insurance, without infrastructure, without some help for the states, would not have the kind of punch it needs," Schumer said.
If its not included the following story will becoming all to familiar to families across the country.
With job losses growing and working hours shrinking, many paychecks are eroding, prompting millions of families to cut their spending. Soaring prices for food and gasoline are overwhelming modest wage gains for most workers, leaving households with even less money to spend. All of which deprives struggling businesses of sales, prompting them to shed more workers, sending the cycle down another turn.
The clock keeps ticking Senator Reid, we need to make sure we get this one right.