On The Precipice

Of another Great Recession?

Is it possible that we are already in a global recession but just don’t know it yet?

And is the U.S. itself—still the epicenter of the world economy—standing on the front edge of another recession? 

I sincerely hope I’m wrong. But warning signs are everywhere. 

The eurozone economy is flat on its back. Greece may be headed for a political crackup and an exit from the euro and European Union. Deposit runs in Greece and elsewhere are beginning, and a credit freeze throughout the continent is not out of the question. Meanwhile, emerging economies like China, India, and Brazil are slumping. 

Here at home, ex-Clinton strategists James Carville and Stan Greenberg sent a memo to President Obama telling him that his campaign message of slow and steady recovery progress is out of touch with Main Street America. They’re right. Of course, Obama’s “private sector is doing just fine” statement is part and parcel of his disconnect from economic reality. 

And the reality isn’t good. Whether you’re a Democrat or Republican, take a look at the numbers:

Job growth has been slipping badly for three months. Retail sales and factory orders are down two straight months. Real incomes are flat. Household wealth is way underwater from the housing collapse, dropping nearly 40 percent in the last three measured years. And GDP was an anemic 1.9 percent in the first quarter. Nearly all leading Wall Street economists are marking down their second-quarter estimates to 2 percent or less. 

But here’s the key point: 2 percent growth is not a recovery. Many economists would call it a growth recession. 

Democrats still look to Franklin Delano Roosevelt as their model for economic central command. But the honest truth is that Roosevelt did not bring us out of the Great Depression. He prolonged it. Or, more accurately, he precipitated a whole sequence of recessions. When the Second World War Started, unemployment in the US was well into double digits and rising. Obama seems determined to make all the same mistakes again.