is the government’s stimulus package is too small to thwart a severe economic downturn.
The cost of an effective economic recovery package may be greater than the average American taxpayer is willing to stomach. But a demise of the nation’s economy, as we currently know it, is an equally, insufferable alternative. So get ready for some major spending by the United States government or get ready for a long and devastating economic downturn.
Below the fold we will take a look at a New York Times article on how the United States’ economy may be in a uncontrolled, downward spin – possibly a death spiral.
In Tuesday’s New York Times (2009 April 7; national paper edition), the article "After Recession, Recovery Will Take Years" by Louis Uchitelle describes the present economic conditions in the following manner:
As the recession grinds on, more and more of the nation’s means of production – its workers, its factories, its retail outlets, its freight lines, its bank lending, even its new inventions – are being mothballed [i.e., taken out of productive operations].
This downward spiral of economic activity continues even after the taxpayers have invested over two trillion dollars, when you sum up the combined bailout moneys spent by the Federal Reserve Bank, Federal Deposit Insurance Corporation and the United States Treasury Department, into the nation's mega-financial institutions and banks.
Also, Uchitelle offers the following comments on the mathematics of the current economic debacle:
The shortfall [economic activity] is running at more than $1 trillion in annual sales and other transactions.
And
Then there is the growth rate itself. In the six years of recovery from the 2001 recession to the current one, the economy grew at an average annual rate of only 2.5 percent, adjusted for inflation.
According to the article, a similar growth rate for today means that the nation may not return to break even until 2012 – sorry Congress.
The truly disconcerting aspect of the current economic calamity is the impact of entrenched, excess capacity. In discussing this economic phenomenon, economist James Crotty is quoted in the article.
"Excess capacity, once entrenched, perpetuates, itself, and that is what is happening now," said James Crotty, an economist at the University of Massachussetts, Amherst. [This is how the economic death spiral works] "Companies cannot hire workers to make more goods and provide more services until their sales go up. But people can’t buy goods and services until they are hired – so the excess capacity just sits there."
So, and as my previous diaries have pointed out by citing James K. Galbraith’s argument that the economic problem and its solution are larger than we think, Congress and the Obama Administration need to develop and enact the appropriate-sized, economic recovery package – this has not been done so far.
The Obama Administration should not continue with its futile and potential, wealth looting schemes to save ‘zombie’ banks (take this link to read reports and analyses at The Huffington Post)while the real/productive economy continues its downward spiral – a potential death spiral. Meanwhile, on the other end of Pennsylvania Avenue the Party of No and its Democratic supporters thwart the Democratic-controlled Congress efforts to pass an effective economic recovery bill(s).
This economic calamity calls for an all-hands-on-deck government effort. Nothing less will do.
Late Updates:
Bloomberg TV is reporting that their survey shows a continuing decrease in consumer spending – no shit (see James Crotty’s comments above).
Also, the New York Times is reporting that none of the 19 banks will fail the Obama Administration’s economic team’s bank stress test, but still may need additional bank bailout funds – ROFLMAO.
After an infusion of billions of taxpayer dollars, would you expect them to not pass the Geithner-Summers' bank stress ‘test’? President Obama, according to Bloomberg TV, plans to meet with his economic team on Friday/2009 April 10 to discuss the bank stress 'test.'