NYC Letter: Overwhelmed By Awesomeness, Part IV

Day 29 of CHOPE

On this day, we gather because we have chosen hope over fear.

President Obama,
ascending, CHOPE in, boogeyman out
Inaugural Address
WASHINGTON January 21, 2009 (White House)

The boogeyman may be out, but he's still on the payroll.

We should have an open and honest discussion about this recovery plan in the days ahead, but I urge Congress to move as quickly as possible on behalf of the American people. For every day we wait or point fingers or drag our feet, more Americans will lose their jobs. More families will lose their savings. More dreams will be deferred and denied.

And our nation will sink deeper into a crisis that, at some point, we may not be able to reverse.

President-elect Obama,
in a speech at George Mason University, Virginia
January 8, 2009 (The Hill)

And irreversible economic crisis? When in modern times has a national economy suffered an irreversible crisis. The Weimar Republic? Post-war Europa? Argentina? Japan? Even the ongoing fiscal train wreck of Zimbabwe (and this) only waits on the absconce of Mr. Mugabe for its prosperity. The only tenable candidate in modern times of an irreversible economic crisis was the Soviet Union.

Even America's Great Depression wasn't irreversible -- though its purported remedies made it longer and harder than it needed be.

OBAMA COMPARES HOUSING CRISIS TO GREAT DEPRESSION
CAPE GIRARDEAU, Missouri May 14, 2008 (Reuters)

OBAMA: U.S. IN WORST CRISIS SINCE DEPRESSION
NASHVILLE October 7, 2008 (Reuters)

No. Wait.

OBAMA DISMISSES GREAT DEPRESSION TALK
Difficulties 'Nothing Compared To What
The Greatest Generation Went Through'
December 7, 2008 (ABC News)

No. Wait. Again.

AGAIN WITH THE DEPRESSION? GREAT.

February 10, 2009 (WaPo) - President Obama visited a struggling hamlet in Indiana yesterday and gave a speech that would not be mistaken for a pep talk. We're in "an economic crisis as deep and as dire as any since the Great Depression," he said, and without quick action, "our nation will sink into a crisis that at some point we may be unable to reverse."

Lawmakers, too, were feeling blue. Senate Finance Committee Chairman Max Baucus (D-Mont.) said on the Senate floor yesterday that "we will get close to the Great Depression" without action, while Sen. Byron Dorgan (D-N.D.) spoke of an economy "perched on the edge of a cliff" that without help will fall "off the side to a deep depression."

"We're only a few steps away from spiraling down to a depression," Sen Chuck Schumer (D-N.Y.) said on television Sunday. "The risk of doing nothing could lead to a Great Depression."

If the economy isn't already in a depression, Americans themselves are likely to be if they've been hearing their leaders drop the D-bomb again and again.

Returning to the White House, the president held a prime-time news conference last night to report on his findings in Indiana. He spoke of "the most profound economic emergency since the Great Depression," a "full-blown crisis," the "winter of our hardship" and the danger of turning "a crisis into a catastrophe."

Brainiac House Speaker Nancy Pelosi (D-CA, 8th) tells ABC News:

Our economy is dark, darker, darkest almost.

Ah-um. [Pause.] Whatever that means it doesn't sound good.

And for good measure, Mr. Obama again:

Q: You said that this nation could end up in a crisis without action that we would be unable to reverse. Can you talk about what you know or what you're hearing that would lead you to say that our recession might be permanent when others in our history have not. And do you think that you risk losing some credibility or even talking down the economy by using dire language like that?

Mr. Obama: No, no, no, no. ...

This is not your ordinary, run-of-the-mill recession. We are going through the worst economic crisis since the Great Depression.

So it is the Great Depression or something like it or something worse or something "dark, darker, darkest almost". [Long protracted pause.] Or maybe it's not even close.

Here is Bradley Schiller, an economics professor at the University of Nevada, Reno, in last Friday's WSJ:

Our current economic woes don't come close to those of the 1930s. At worst, a comparison to the 1981-82 recession might be appropriate. Consider the job losses that Mr. Obama always cites. In the last year, the U.S. economy shed 3.4 million jobs. That's a grim statistic for sure, but represents just 2.2% of the labor force. From November 1981 to October 1982, 2.4 million jobs were lost -- fewer in number than today, but the labor force was smaller. So 1981-82 job losses totaled 2.2% of the labor force, the same as now.

Job losses in the Great Depression were of an entirely different magnitude. In 1930, the economy shed 4.8% of the labor force. In 1931, 6.5%. And then in 1932, another 7.1%. Jobs were being lost at double or triple the rate of 2008-09 or 1981-82.

This was reflected in unemployment rates. The latest survey pegs U.S. unemployment at 7.6%. That's more than three percentage points below the 1982 peak (10.8%) and not even a third of the peak in 1932 (25.2%). You simply can't equate 7.6% unemployment with the Great Depression.

Other economic statistics also dispel any analogy between today's economic woes and the Great Depression. Real gross domestic product (GDP) rose in 2008, despite a bad fourth quarter. The Congressional Budget Office projects a GDP decline of 2% in 2009. That's comparable to 1982, when GDP contracted by 1.9%. It is nothing like 1930, when GDP fell by 9%, or 1931, when GDP contracted by another 8%, or 1932, when it fell yet another 13%.

Auto production last year declined by roughly 25%. That looks good compared to 1932, when production shriveled by 90%. The failure of a couple of dozen banks in 2008 just doesn't compare to over 10,000 bank failures in 1933, or even the 3,000-plus bank (Savings & Loan) failures in 1987-88. Stockholders can take some solace from the fact that the recent stock market debacle doesn't come close to the 90% devaluation of the early 1930s.

CHOPE.

Scary. Dark. Nothing unpent CHOPEy spending can't wave away.

Posted by Damian at February 17, 2009 03:00 PM