Recessions Suck

[marmar]

from TPM Cafe:



Recessions Suck
By Jared Bernstein | bio


I’m sorry to be a dismal scientist, but the US economy appears to me and some other economists, including some big shots, to be entering a recession. Most people think we’re already there. (Given lags in data, recessions don’t get officially identified until after the fact.)

But what does recession mean to folks on the ground? How bad is it, really?

Pretty damn bad. Given recent historical patterns, three million more people could join the unemployment rolls, and middle-income families, already squeezed, and with income levels still recovering from the last recession, could lose another $2,500.

Here’s a quick summary of how things tend to go bad in a downturn.



Unemployment, averaging all the way back to the late 1940s, goes up about three percentage points in a recession. Minorities and lower-income workers tend to get hit harder: for African-Americans, whose unemployment rate is already twice that of whites, the average recessionary increase is four points, taking their jobless rate solidly into double digits.

Given how much the economy and the nature of the business cycle have changed over the years, it probably makes more sense to emphasize the last two recessions—those in the early 1990s and 2000s—in these comparisons. These downturns were both milder in terms of length and depth by some measures, like gross domestic product, but quite protracted in terms of job and income losses.

In those cases, unemployment rose 1.3 percentage points over the official recession, and then just about another point in the jobless recoveries that followed. Let’s say the next recession (which may be underway) and recovery play out much like these last two. That implies an addition of three million people to the unemployment rolls. .....(more)

The complete piece is at: http://www.tpmcafe.com/blog/coffeehouse/2008/jan/11/recessions_suck

[Demeter]

1. Correction: We've Been in Recession Since 2001; We Are NOW Entering the Greater Depression

which is going to be several magnitudes of order larger than the one our grandparents and great grandparents endured.

[KoKo]

2. If you need lots of Dental Work....your Dentist can't get the funding to allow you to do his Payment

that's "interest free" that you can subscribe to. Same thing if you don't have Health Insurance..your Doctor can't borrow to give you a program to pay off your fee's with his/her "no interest Payment Plan."

[Viva_La_Revolution]

3. Link to the Plan mentioned in the article...

Looks like JE's plan hits all the major points. :)

Criteria for an effective stimulus plan

There is always debate over what an effective stimulus package should look like. Many different policies are purported to stimulate the economy, but it is important to distinguish between those that will have their effect in the very near-term to offset rising unemployment this year and those policies that have longer-term effects. Any useful stimulus package should strengthen the recovery immediately and create more jobs in 2008. Some obvious examples of policies that fail this criterion are the ones just suggested by the Bush administration, including eliminating the estate tax and extending the high-end income, capital gains, and dividend tax cuts beyond 2010. These policies have nothing to do with the job creation we will need in 2008.

An effective, appropriate stimulus package should meet the following five criteria:

1. A stimulus package should generate growth and jobs to offset rising unemployment. The point of stimulus is to increase economic growth and thereby generate more jobs. The reason that employment growth is slowing and unemployment is rising (and will continue to do so) is that there is a shortage of demand for goods and services: we will have the capacity to produce much more than we will be consuming, and what is missing are customers able and confident enough to make expenditures.

2. A stimulus package should take effect quickly. The most frequently cited potential downside of stimulating demand through government spending is a concern that the spending will not yield economic activity quickly because of bureaucratic delay. A smart stimulus—such as the one proposed here—would have its impact within the next year. Ideally, an effective package would have some components that have immediate effect and others that might have impact in six months to a year, thus ensuring a solid foundation for the recovery. Without a stimulus, unemployment—now at 5.0%, half a percent higher than in the spring of 2007—would likely rise throughout 2008, reaching around 5.5% by July, and 6.0% by the end of the year.

3. A stimulus package should raise current deficits but not affect the long-term budget outlook. The purpose of any good stimulus package is to boost immediate job growth. For this purpose we need one-time measures that, if the recession deepens, can be extended as necessary. Permanent, ongoing measures that will affect the budget two or three years from now are, in most cases, inappropriate.7 Simply put, any stimulus proposal involving tax cuts and "pump-priming" expenditures must employ one-time, temporary measures. On the other hand, a deficit-neutral stimulus package is an oxymoron: if the plan does not raise the near-term fiscal deficit, then it has not expanded net expenditures in the economy and will not lead to new jobs.

4. A stimulus package should target unmet needs. Another goal of any good stimulus plan should be to meet, where possible, unmet social needs. For instance, it is widely acknowledged that there is a huge backlog of necessary school and bridge repairs and new construction projects. A temporary spending increase for such infrastructure would be doubly beneficial in that it would meet the other criteria listed above but also address an acknowledged, pre-existing need. Other examples could include funding needed sewage-treatment plant construction or making public facilities energy efficient.

5. A stimulus package should be fair. The distribution of wages, income, and wealth in the United States has become vastly more unequal over the last 30 years. In fact, this country has a more unequal distribution of income than any other advanced country. Therefore, a criterion for favoring one stimulus plan over another should be that the plan avoids exacerbating income inequality and, wherever possible, acts to lessen current inequalities. A temporary increase in federal revenue-sharing with the states, for example, would fulfill this criterion well by helping preserve public school spending, Medicaid for low-income families and low-income elderly in nursing homes, and other state programs that could face cutbacks due to state fiscal crises.

lots, lots more... http://www.epi.org/content.cfm/bp210