The Great Recession: Will we ever get out?

Each time we seem ready to emerge from this rut, said Peter S. Goodman in The New York Times, we slip back in again. Despite bailouts of the banking and auto industries, “more than $800 billion in federal spending, and trillions of dollars worth of credit from the Federal Reserve, fears of a second recession are growing.” Recent economic reports show no sign of the full recovery the Obama administration had hoped for; unemployment remains stuck at 9.6 percent and the pace of economic growth is moribund at 1.6 percent. Home sales are plunging. Everything was supposed to be better by now, said John Kostrzewa in The Providence Journal-Bulletin. Instead, “the economy is weakening,” and uncertainty is sapping the confidence of employers and consumers alike. “So what went wrong?”

It’s quite obvious, said The Wall Street Journal in an editorial. The White House totally botched its response to a very deep recession. When President Obama took office, we “advised the administration to focus on the recovery.” Instead, Democrats viewed the economic crisis as a political opportunity to transform the country, and “embarked on the most sweeping expansion of government since the 1960s, imposing national health care, rewriting financial laws,” and launching an ill-conceived, $862 billion stimulus bill. The result was massive deficit spending, an alarming government intrusion into the marketplace, and growing fear about the country’s direction. Liberals always think they can steer the economy through rough seas by “pulling the correct monetary and fiscal policy levers,” said Matthew Continetti in The Weekly Standard. But “the economy is not a ship.” Until Democrats stop meddling, we won’t get through this storm.

Actually, both President Bush, with the bank bailouts, and Obama, with the stimulus, were right to intervene, said USA Today. Those actions saved us from “economic calamity”—a meltdown of several major banks, the collapse of the financial system, and a true depression. But Washington now needs to “restore confidence” in the nation’s solvency by tackling long-term deficits fueled by rising Social Security and Medicare obligations.

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It will take more than that, said John B. Judis in The New Republic, because this was no recession. “The current downturn is much more similar to the depressions of the 1890s and 1930s than to post–World War II recessions.” Like these major economic crises, it was sparked by a financial crisis and is global in reach. If the stimulus and other policy prescriptions failed, it’s partly because the White House, Congress, and many economists misdiagnosed the severity of the problem.

We’ve been misdiagnosing it for decades, said Robert Reich in The New York Times. The economy’s problems are deep and structural, and stem from the steady erosion of America’s middle class. Globalization and our tax and economic policies have caused a vast redistribution of income to the very wealthy: In the 1970s, the richest 1 percent of American families took in 9 percent of the nation’s total income; today, the top 1 percent take in 23.5 percent of total income. In real dollars, the median worker earns less than he did 30 years ago. As a result, the middle class lacks sufficient purchasing power to drive demand and create the kind of consumer-driven boom we saw in the 1950s. Until we find a way to encourage economic benefits to flow to the broad middle, instead of to the narrow top, “we’ll be stuck in the Great Recession.”