The Great Stagnation continues
These days, most of my writing is about the graph atop this post. Question 1: How do we get unemployment down? Question 2: How do we get unemployment down faster?
But one of the Great Recession's quieter attacks on our economic security has been its ability to distract us from its predecessor, and in some ways, its cause: what Ed Luce calls "the Great Stagnation."
Look at the graph atop this post again. It's about the long road back to early 2007. But early 2007 was terrible. Not compared with late 2007, of course. But though the economy hadn't yet crashed, we'd already lost control. You can pick your statistic: Median incomes weren't rising, but income inequality was. Poverty was doing something we'd never seen before and increasing amid an economic expansion. Debt was up, and income mobility was down. But for my money, I'll stick with this factoid from Luce: "In the last expansion, which started in January 2002 and ended in December 2007, the median U.S. household income dropped by $2,000 – the first ever instance where most Americans were worse off at the end of a cycle than at the start.
This bad economy led to a bad economic crash. For all that we blame Wall Street for the financial crisis, we vacuumed up the mortgages and the credit and the refinancing offers and all the rest of it because we were replacing real income growth with fake asset growth. That worked, until it didn't.
Digging out of our current hole is daunting. It has, quite understandably, distracted us from figuring out how to clamber back up the mountain. But one is no less important than the other.
There's been a real allergy to long-term thinking amid a short-term crisis. The stimulus attempted to include some long-term measures -- medical research, health IT funding, energy research, and more -- amid its raft of short-term spending. The reconciliation package that finished health-care reform also expanded access to college education. But those moves were criticized -- the focus, we were told, should be on jobs -- and so there've been few further attempts. Instead, we're letting states chop apart their education systems, and we're hearing calls for the government -- which is to say, us -- to back off and stop trying to modernize our health system, our energy grid, our tax code, and our physical infrastructure.
Wrong or right, that means that if we ever get out of this hole, we're merely back to the lip of the abyss. That's not good enough. We can be pretty sure that the Great Recession will end. We've not yet come up with a plan to banish the Great Stagnation alongside it.
August 2, 2010; 12:41 PM ET
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