Nouriel Roubini, the economist and founder of Roubini Global Economics, has yet to join the growing but far from unanimous chorus saying a double-dip recession may be in the offing. On the other hand, he isn't exactly optimistic. The guy known as "Doctor Doom" - who in 2006 prophesied the massive hit the U.S. economy would eventually take (to a barrage of ridicule from experts who didn't predict the recession until well after it was under way) - told CNBC today:
"Everything signals a slowdown of the US, a slowdown of Europe, a slowdown of Japan and a slowdown of China," he said.
The US economy will grow at a rate of 1.5 percent, while the euro zone and Japan will see growth close to 0 and China will grow at a rate of 7 percent, he said. ...
The unemployment rate goes higher, the budget deficit is larger, home prices don't stabilize, but fall further and trade tensions with China will be bigger, he said.
"You don't need to have a double dip recession to have a situation that is dismal," he said.
The near-term future is not soothing. Europe's in trouble, China is showing signs of a housing bubble, the effect of the U.S. stimulus is fading, the growth rate in U.S. manufacturing and non-manufacturing is slowing, small businesses that are usually the primary engine of growth after a recession are not hiring, office vacancy rates are at a two-decade high, factory orders have dropped unexpectedly, initial unemployment claims have refused to move down for the past seven months, long-term unemployment is still running at a record high, the generation of private-sector jobs is anemic after a couple of encouraging months, retail sales have softened, state tax revenues have increased slightly this quarter but their budgets remain grim, recently and the gross domestic product for the first quarter has been revised downward (twice) to 2.7 percent. Reflecting all this, consumer confidence has fallen.
Meanwhile, operating as what economist Paul Krugman calls the "coalition of the heartless, the clueless and the confused," Republican obstructionists and a few Democratic enablers are more focused on the deficit than extending unemployment benefits for millions of Americans who have been most battered by the economic downturn.
Given a recent Calculated Risk analysis, the conventional expert view that the recession ended in Julyish 2009 when the GDP started growing again can be called into question not just by rank-and-file Americans asking what-the-devil-are-you-talking-about, but also by the experts themselves. And if we haven't really emerged, technically speaking, from recession, then there really is no reason to worry about a double dip. Because, instead of two back-to-back recessions, the record-breaking one that began in December 2007 will just turn out to be more than twice as long as any other in the post-Depression era. The third depression, as Krugman has famously labeled it.
Or, things might not be quite so bad, just the slow but painful recovery that many Federal Reserve Bank branch presidents have been talking about for the past nine months. Tepid recovery, double-dip recession, continued recession, third depression. Missing from that collection of options is one that a few powerful voices were touting not so many months ago: a robust recovery with 5-6 percent GDP growth and a spectacular repair of the unemployment situation, with as many as half a million new jobs generated each month.
Elected Democrats are absolutely right to point out that without actions taken by the Obama administration in February 2009, actions all but three Republican Senators tried to block, the situation we now face would be far worse. The GDP might still be in negative territory, there might well be 17 or 18 million unemployed instead of 14.6 million, and even more millions of underemployed and labor force drop-outs than the 15 or so million there already are. Maybe 45 million instead of 40 million people would be surviving on Food Stamps. There would no doubt have been more bankruptcies, foreclosures, businesses going under.
But, going into November, the party needs a better message than "things would be worse" if President McCain and Vice President Palin were running the show. Of course they would. The Republican view of economics, after all, can be summed up as "Let the devil take the hindmost." But a better message without a better program is hollow. To be taken seriously, the cry of "jobs, jobs, jobs" must be combined with a serious industrial policy, new trade policy, direct hiring by the government, and a long-term vision to deal with structural problems like the widening rich-poor gap that have plagued the economy for decades and are growing steadily worse.
Some will object. Impossible, they will say. "Political reality" will allow no such approach to be adopted. Not enough votes in Congress. Others will argue that since all of one political party and half the other are beholden to or fully integrated into the American oligarchy, all these reformist ideas are progressive pipe-dreams, dead on arrival. Such no-can-do cynicism generates apathy, which generates despair, which is the killer of activism. A spectacularly defeatist dead-end path. Taking it can only lead to a self-fulfilling prophecy.