As it Turns Out
June 5, 2008 · Updated 3:00 PM
Our oldest grandson was visiting with us over the holidays when the topic of economics was broached. Hes in his third year in economics at Whitman, has been active in debate, and our political paths dont always cross. This intimidating package finally gave me the momentum to learn a little more about the current economic conundrum. First thing I learned was that many economists and analysts believe we are near, if not beginning, a recession.
So what exactly is a recession?
Simply put, a recession is a decline of gross domestic product (goods and services produced by labor and property in the U.S.) lasting longer than six months. Who determines a recession? The National Bureau of Economic Research (NBER). Key markers include retail, manufacturing, employment and personal income. NBER explains that a recession begins at the peak of economical expansion and ends at the trough. Because of changing estimates and forecasts, the NBER can declare a recession only two or more quarters after the downturn.
The conversation with my grandson began with a vague complaint (mine) about the economy. His chipper reply was that at least employment was up. Neither of us knew at the time that employment had actually gone down considerably in December. All I could think of to whine about was the usual the wimpish dollar; the national debt; oil prices; billions lost in Iraq; poverty; the foreclosure crisis; and that sadly my grandson and his generation will be trying to right these economic disasters for decades to come.
The economy has become the most important issue for polled voters. The presidential candidates have stepped up to the microphone with ideas. The slowest on the uptake have been the Republican candidates who appear to be so far mostly stuck supporting the all-purpose tonic of more (permanent) tax cuts for the richest. Democratic candidates are talking about temporary moves to support the people most likely to be hurt the most by a recession. Hillary Clinton is calling for a short-term stimulus package (unemployment, heating aid, and foreclosure grants); John Edwards has been advocating his stimulus package on energy, job training and unemployment; and Barack Obama is leaning toward tax cuts to get the economy back on track.
The Federal Reserve will probably cut the short-term interest rate. The Bush administration is pondering its own stimulus package. And, to their credit, the House has passed a bill to revamp unemployment compensation.
Joseph Stiglitz, leading economic professor at Columbia, says, Some portion of the damage done by the Bush administration could be rectified quickly. A large portion will take decades to fix ... Think of the interest we are paying, year after year, on the almost $4 trillion of increased debt burden even at 5 percent, thats an annual payment of $200 billion, two Iraq wars a year forever.
According to the latest CBS News/New York Times poll, only 19 percent of Americans think the country is headed in the right direction. Americans are learning.
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