Many progressives, and many economists, admire Dean Baker, and rightly so; he has a knack for getting it right. For example, he saw the housing bubble for what it was in 2002.
I'm almost certain that Baker has never used the d-word to describe our current economic condition -- until now.
The piece speaks for itself, and in the clear layperson-friendly language that characterizes Baker's work. He points out that the reason the economic downturn in the thirties became what we now call is the Great Depression, was mass unemployment; to be more precise, it was the political failure to respond to mass unemployment due to a dangerous and misplaced concern about budget deficits - sound familiar?
Unfortunately, the country seems destined to follow the same course in the current slump as it did in the 30s. The May jobs report should have provided the sort of stiff kick that is needed to revive discussion of additional stimulus. Instead, it seems to have barely shaken Washington’s ongoing obsession with deficits.
He points out that a poor labor market amounts to not only fewer jobs but also less income because workers don't have the bargaining power to demand better wages. The horrid labor market, plus the $7 trillion (and ongoing) deflation of the housing bubble, is limiting consumption, which accounts for 70 percent of demand in the economy. In theory, he says, relief could come in the form of trade generated by massive increase in demand from trading partners, but they're also suffering economically. That leaves government.
With these other sectors accounted for, this leaves the government as the only remaining candidate for boosting the economy. But additional stimulus is not even on the agenda in Washington. Instead, we are seeing cutbacks at all levels of government. These cutbacks led to a loss of 29,000 jobs in May. The pace of job loss is only likely to increase when states impose another round of cuts on July 1, the beginning of a new fiscal year for most of them.
And that, Baker says, is not the only "depressing" factor on the horizon.
In addition to the state and local cuts kicking in next month, the new fiscal year for the federal government begins October 1. This is also likely to involve further cuts in spending. And the payroll tax cut is scheduled to end 3 months later, as is the extension of unemployment benefits. At some point, the pain of high unemployment across the country may lead to some new thinking in Washington, but until that time, welcome to the second Great Depression.
UPDATE: I just read a post about a Democracy Corps poll that points to both the deep economic woes and the problem with Democratic Party messaging. First, on the economic woes:
Our tracking on people‘s own and immediate family experience shows a stable 35 percent who have lost a job in the last year and shows a worsening situation on health care, foreclosure, and particularly reduced wages and benefits. That is particularly true for white non-college and working class voters.
Then on the messaging woes:
The White House metaphor of getting the car out of the ditch on to level ground and not giving the car back to the guys who drove it into the ditch was unconvincing, too light-hearted, backward looking, and out-of-touch. People thought they were still in the ditch.
People thought they were still in the ditch. Because they were, and are.
Chronic unemployment worse than [during] Great Depression
About 6.2 million Americans, 45.1 percent of all unemployed workers in this country, have been jobless for more than six months - a higher percentage than during the Great Depression.