|We're In A One-and-a-half Dip Recession
By Robert Reich
WE'RE NOT IN A double-dip recession yet. We're in a one
and a half dip recession.
Consumer confidence is down. Retail sales are down.
Home sales are down. Permits for single-family starts
are down. The average work week is down. The only
things not down are inventories - unsold stuff is
piling up in warehouses and inventories of unsold homes
are rising - and defaults on loans.
The 1.5 dip recession should be causing alarm bells to
ring all over official Washington. It should cause
deficit hawks to stop squawking about future debt,
blue-dog Democrats to stop acting like Republicans, and
mainstream Democrats to get some backbone.
The 1.5 dip recession should cause the President to
demand a large-scale national jobs program including a
new WPA that gets millions of Americans back to work
even if government has to pay their wages directly.
Included would be zero-interest loans to strapped
states and locales, so they didn't have to cut vital
services and raise taxes. They could repay when the
economy picked up and revenues came in. The national
jobs program would also include a one-year payroll tax
holiday on the first $20,000 of income.
The President should stop talking and acting on
anything else - not the deficit, not energy, not the
environment, not immigration, not implementing the
health care law, not education. He should make the
whole upcoming mid-term election a national referendum
on putting Americans back to work, and his jobs bill.
Are you for it or against it?
But none of this is happening. The hawks and blue dogs
are still commanding the attention. Herbert Hoover's
ghost seems to have captured the nation's capital.
We're back to 1932 (or 1937) and the prevailing
sentiment is government can't and mustn't do anything
but aim to reduce the deficit, even though the economy
is going down.
It looks like there'll be an extension of unemployment
benefits. (If it weren't for the human suffering
involved, I wish the Republicans had been forced to
filibuster that bill all summer and show the nation
just how much they care about people without jobs.) But
the fiscal stimulus resulting from this will be tiny.
Jobless benefits are humane but they alone don't get
And what about the Fed? It's the last game in town. The
1.5 dip recession should cause Ben Bernanke to revert
to buying mortgage-backed securities, buying Treasury
bills, buying anything that will get more money into
But the Fed chair continues to talk about pulling money
out of the system and raising short-term rates as the
economy improves. During Wednesday's appearance before
Congress he made it clear monetary policy won't be
loosened; it just won't be tightened for a while. And
he reiterated that deficits were "unsustainable."
He admitted unemployment would probably remain high for
a long time, and the likelihood of growth was "weighted
to the downside," which in Fed-Speak means we're still
in trouble. And he said the Fed still has the tools to
do what's needed if the economy needs more help.
But would he use the tools now? No. "We need to look at
them carefully to make sure we're comfortable with any
steps that we take." This is like the captain of the
Titanic looking carefully at his lifeboats to make sure
he's comfortable with using them as the ship starts