The Endless Bummer


So how's that Recovery Summer campaign going? According to both a new Wall Street Journal/NBC News poll and the latest jobless figures, not so hot:

Nearly two-thirds of Americans believe the economy has yet to hit bottom, a sharply higher percentage than the 53% who felt that way in January.

How could they possibly believe such a thing, when no less an eminence than Tim Geithner assured us recently in The New York Times that "we are coming back," because "the White House and Congress helped save 8.5 million jobs and increased gross domestic product by 6.5 percent relative to what would have happened had we done nothing"? Maybe because of news like this:

Initial [jobless] claims have now risen in three of the last four weeks and are close to their high point for the year of 490,000, reached in late January. The four-week average, which smooths volatility, soared by 14,250 to 473,500, also the highest since late February.

Analysts said that the unexpected rise in claims suggests hiring in August won't be much better than July. The economy added a net 12,000 jobs last month after excluding the loss of temporary census positions.

The jobless claims report "represents a very adverse turn in the labor market, threatening income growth and consumer spending," Pierre Ellis, an economist at Decision Economics, wrote in a note to clients.

The prospect of more layoffs added to this week's grim outlook for the economy, which began Tuesday when the Federal Reserve lowered its assessment of the recovery.

As many of us were pointing out back in the fall of '08, one crucial difference between this economic crisis and the 1978-82 downturn it semi-resembles is that back then, "Washington…was forcing us to swallow our medicine to whip inflation and create conditions for future growth. Nowadays the only government medicine being doled out is temporary pain relief." Bipartisan Washington these days seems to think that the mere existence of economic unpleasantness (the unemployment, the collapse of some asset prices, the credit unwind) qualifies as medicine, just because it tastes bad going down. As Reason has been pointing out repeatedly since George W. Bush's first big televised case of the vapors, the long-term picture will not meaningfully improve until you address the underlying problems, and putting off that day of reckoning with an ongoing series of taxpayer-financed cushions will just prolong and deepen the pain.

Some relevant Reason reading, in chronological order:

* "The Coming Recession: Seven observers debate the (sorry) state of the economy," by Gerald P. O'Driscoll Jr., Megan McArdle, Ron Paul, Robert Bryce, Robert Higgs, Robert E. Wright, and Donald J. Boudreaux; June 2008.

* "Lessons From the Great Inflation: Paul Volcker and Ronald Reagan's forgotten miracle created a quarter century of prosperity–and a dangerous bubble of complacency," by Robert J. Samuelson; January 2009.

* "Why the Stimulus Won't Work: And several ideas that might," by Veronique de Rugy, February 2009.

* "Will We Be Stimulated? Economists sound off on Obama's stimulus package," by Robert Higgs, Jeffrey Rogers Hummel, Megan McArdle, Deirdre McCloskey, Allan H. Meltzer, Jeffrey A. Miron, Michael C. Munger, William A. Niskanen, Johan Norberg, and Mark J. Perry; May 2009.

* "Turning Japanese: Japan's post-bubble policies produced a 'lost decade.' So why is President Obama emulating them?" by Anthony Randazzo, Michael Flynn & Adam B. Summers; July 2009.

* "The Myth of the Multiplier: Why the stimulus package hasn't reduced unemployment," by Veronique de Rugy; November 2009.

* "Five Lies About the American Economy: The Obama team's favorite slices of fiscal baloney," by Tim Cavanaugh; April 2010.

* "The Myth of the Recovery: The White House claims the economy is on the mend. That's a fantasy," by Anthony Randazzo; April 2010.