Another Great Depression?

What happened

Federal Reserve Chairman Ben Bernanke said Wednesday that the American economy could fall into a recession—two consecutive quarters of economic contraction—in the first half of the year. It was his bleakest assessment since the mortgage crisis began. Bernanke said housing continued to drag down the broader economy, and he urged members of Congress to help homeowners in danger of losing their homes to foreclosure. (The New York Times, free registration)

What the commentators said

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“More important than whether the current downturn meets the technical definition of recession,” said USA Today in an editorial, “is the question of how bad this is going to be.” The nation came “perilously close to something far worse” than a recession “when Bear Stearns, Wall Street’s fifth-largest investment bank, came within 24 hours of filing for bankruptcy protection.” If the Fed hadn’t stepped in with its “controversial rescue plan,” we could have seen a chain reaction that would have invited “not recession but depression.”

Such speculation is music to Democrats’ ears, said The Wall Street Journal in an editorial. They’re trying to drum up votes by likening President Bush to Herbert Hoover, suggesting that he’s messing up the economy and sending Americans toward another Great Depression. But it’s Democrats who want to rescind tax cuts and erect protectionist trade barriers as the economy stumbles, as Hoover did. In this election year, maybe we really “should be afraid of Hoover's ghost.”

“For all the alarms about a repeat of the Great Depression,” said Steve Chapman in the Chicago Tribune, “it’s not a sure thing we’ll even have a recession, much less a serious one.” The real danger is that all the fear in the air over the mortgage crisis will prompt Washington to go overboard with “an effort to rescue people who can’t pay their mortgages” that “will probably make a bad thing worse.”

It’s quite true that “our current recession” has a long way to go before it morphs into a “full-fledged depression,” said Andrew Leonard in Salon. “We’re not there yet. And maybe we’ll never get there.” But if we “want to see The Great Depression: The Sequel,” all we have to do is keep on the Bush administration’s path and continue to “ignore income inequality,” “whittle away at the safety nets that cushion Americans from ill economic winds,” and “weaken government oversight of Wall Street.”