Feb 3rd 2010

Defining the Second Great Depression

by Dylan Loewe

Dylan is a regular op-ed contributor for The Guardian

From the moment he was sworn into office, President Obama had a pretty overwhelming task ahead of him. In that month, the economy lost 700,000 jobs. It lost nearly as many the month before. The credit markets had frozen; the financial institutions and auto industry would need undeserved bailouts. Saving the economy from a Second Great Depression would require an enormous effort, huge chunks of political capital, all with no guarantee that any of it would work.

A year later, it has worked. The Second Great Depression was averted. But no one seems to have noticed.

That's certainly understandable. Unemployment is still hovering at 10 percent. The president's budget forecast now predicts that unemployment won't drop below 10 percent until the end of 2010, and won't drop below 8 percent until the year 2012.

This straddles the administration with an especially difficult political problem. The economy is in a dramatically better place than it would have been without the administration's intervention. But because it is still in such a crummy spot, no one is giving the administration any credit.

That, by the way, seems to be as much the administration's fault as anyone else's. Anytime positive economic numbers are reported, administration officials are weary of taking a curtain call. When it was announced last week, for example, that the economy grew 5.7 percent in the fourth quarter of 2009 -- an extraordinary achievement -- Larry Summersdescribed it as a "a statistical recovery and a human recession." The administration's talking points about the budget includes this point: "A year later, the economy is back from the brink -- and is growing again. But this economic growth is cold comfort for the millions of Americans who have lost their job."

All of this is understandable. From a political standpoint, the last thing the administration needs is to sound tone deaf on the economy, to give the Americans the impression that they believe the current state of affairs deserves a mission accomplished banner.

But there is also a substantial risk in having only one possible response to economic news, whether it's good or bad. That kind of dynamic makes it difficult, if not impossible, for voters to have any faith in the economic policies that have worked so effectively thus far.

The other problem is this: Having avoided a Second Great Depression is obviously a big deal. But it's totally abstract. It could have been worse, sure, but how much worse is unclear to almost everyone, even those who are dialed into the daily debate.

The Democrats cannot afford to spend the next two years with the same basic posture about economic progress, without having clearly defined for the American people exactly what it was that we avoided with the Obama economic program.

It won't be easy, but there are already some clear markers that can be used as jumping off points. For example, Hank Paulson, who served as President Bush's Treasury Secretary and who orchestrated the first round of bailouts, has said in recent interviews that, absent the bailouts, he believes the unemployment rate in the country would have hit 25 percent.

Twenty-five percent!

We know that the stimulus bill created or saved two million jobs. But Paulson is making a much grander argument. With a workforce of more than 150 million people, Paulson is suggesting that the administration's continuation of the TARP program saved almost 23 million jobs.

That's what the Second Great Depression would have looked like. Not 15 million people unemployed. Closer to 40 million.

We know that climbing out of the economic hole we find ourselves in is going to take years. We also know that during that time, Republicans will be able to capitalize on economic populist anger to maintain their still relatively weak grip on power.

But if Democrats can't stand up and clearly articulate the nightmare scenario we were saved from, while championing the progress we're making everyday, then the economic disaster that Republicans caused may well be the same disaster that helps them surge back into power.


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