Note to readers: You won’t see me much in August. I’ll be taking time off and working with my editor to get my new novel ready for publication next summer (it’s a thriller set in the newspaper world — go figure). I’ll blog if major news happens. Otherwise, I hope you’ll join me again in September).
Top of the News: GDP contracted at a slower rate than expected in the second quarter. The housing crash appears to have hit bottom. The contraction may be over. The recession as felt by most Americans, however, will linger.
The GDP measurement has for years been an ever-narrowing view of the economy. It rose smartly in the early- and mid-2000s, but wages stagnated, benefits fell and hiring never regained its pre-2001 strength. As for housing, bottom will still hurt. The economy circa 2007 was based on a vast expansion in debt-based construction, buying, home-improvement, flipping and speculation. In many ways, it was the economy. That’s not coming back.
A host of challenges remain, even if the economy doesn’t sustain more shocks. Chief among them is joblessness. The great American jobs machine is stuck. Lower-than-expected layoffs are considered good news. Wages and hours are falling. The huge debt overhang for consumers and businesses will also impede real recovery. And this remains a global downturn.
There have been winners, of course. The New York Times reports that during the worst part of the financial crisis, bailed out banks were paying their bigs billions in bonuses. Your tax dollars at work.
There remain the dangers of fresh shocks. The same newspaper took a deep look at AIG, winner of the biggest bailout in history. We’d been told it was a sound insurance company that had one troubled unit, the one that cooked up (highly profitable) weapons of financial mass destruction. But, no. In fact, AIG’s insurance units are showing considerable weakness. Another wild pitch source: the several bubbles inflating in China.
The potential for further shocks remains in Seattle, too. The big one: More unpleasant surprises out of Boeing.
So the data tell us that the aggressive government intervention by the Bush and Obama administrations averted another Great Depression. That’s an accomplishment. That so much treasure was allocated to a highly concentrated and politically power financial sector — FDR just closed the bad banks and spent money helping people, building infrastructure and aiding productive businesses — tells a more unsettling tale.
The Back Story: I thought “Cash for Clunkers” was a new nickname for the bank bailout. But, no, it’s a federal program giving people vouchers to help them buy more fuel efficient cars. It quickly burned through $1 billion and lawmakers are scrambling to find more money.
As a program to aid Michigan and the Midwest (and the foreign automakers), as well as auto dealers, this probably helps the grass roots more than most of Washington’s recent moves. The local Chevy dealer won’t use it to pay himself a $100 million bonus.
But it’s just that. It shows a continued inability of leaders to summon the will for truly sustainable policies. One could get federal help by upgrading to a car that gets as little as 4 extra miles per gallon. To paraphrase Henry Ford, “You can get any car you want, as long as its colored greenwash.”
Today’s Econ Haiku:
The good news for you?
A month sans silly haiku
Now that’s poetry