It would be a complete falsehood to claim that the Great Recession went better than most people think. In fact, it was far worse than we ever expected (back in 2008 that is): 5.1 percent shrinkage of the economy during 2007-09 and record job losses in the months just before and after Obama’s inauguration in January 2009. Analysts in 2008 predicted things would be bad, but they had no idea just how pervasive the effects of the financial sector’s and housing market’s collapses would be. It’s common knowledge that this is the worst crisis we’ve encountered since the Great Depression.
What has been far better than most people realize is the recovery from this catastrophe. We’re still in a very difficult time, with unacceptable unemployment levels and a lack of demand that isn’t propping up business as it needs to. But things are getting better, and while complete recovery can’t come soon enough, that’s what’s important in the broader scheme of things. The Bureau of Economic Research finds that the recession itself — meaning the time where the economy shrank and job losses increased — ended in 2009. In other words, we’re not where we should be, but the worst is over, and things are slowly getting much better.
In the wake of the most frightening economic devastation of the Great Recession, the federal government passed a now-infamous sweeping set of government spending programs titled the American Recovery and Reinvestment Plan of 2009 — the stimulus package. Following the tenets of Keynesian economics, hundreds of billions of dollars were poured into infrastructure investment, health care, education, aid to low income and unemployed individuals, tax incentives and other programs in an effort to create jobs immediately and boost demand. It was a completely useless expansion of federal spending that constitutes the greatest waste of money in American history and did nothing to aid recovery. Right? Wrong.
Prepare yourselves, because the most unorthodox political blasphemy of this entire article so far is about to follow. The stimulus worked. The three indicators of economic health we need to look at are gross domestic product, total payroll employment and private-sector layoffs. Before the recession, GDP was rising at a very respectable rate, as were employment levels. 2008 marked a dramatic reversal in this trend: stagnation and then dramatic decline in GDP (9 percent during the fourth quarter alone), extreme rise in PSL (from 1.7 million layoffs in April to 2.3 million layoffs in December alone). January 2009 saw more job losses in a single month than in any single month for 60 years.
Then came February 2009: GDP declined steadily for a short while, and then began to grow again during the third quarter. Job losses began decreasingly steadily — meaning that we were still losing jobs, but at a remarkably slower rate. By the end of the year, the economy was seeing a net growth in jobs for the first time since the recession started. Private-sector layoffs began declining slowly, reaching pre-recession levels within a year.
Date that the stimulus package was signed into law: Feb. 17, 2009. Coincidence? I think not. Don’t get me wrong: Obama saw a lot of job losses during his first year in office, and the economy didn’t become better with a wave of his magic wand. But it’s the trend that’s important! During the past three years, we’ve been doing better and better each month — and with recent statistics showing hundreds of thousands of jobs being added every month, the future is looking much brighter.
— Geoffrey Bell is the Daily Nexus liberal columnist.
In Response, Right Said:
Yes, technically — according to the strict economic definition of the word — the Great Recession is over. But by almost any indicator, we are not in an economic recovery. The “recovery” in terms of job gains, contrary to what my colleague says, has been disturbingly uneven. Economic growth has remained anemic, nowhere close to the 3 percent growth that would occur under normal circumstances. I’ve said it before and I’ll say it again — Keynesian economics does not work; it’s never worked in our past, it’s not working now. So yes, the stimulus package was a complete waste of taxpayer dollars, another boondoggle spending project that has driven us deeper into crushing debt.
If the president is truly an “ardent believer in the free market” like he claimed he is, he would have realized that this approach is completely inefficient, particularly now that we are in a global economy. It would have been far more efficient and effective for him to do pretty much everything he hasn’t done: provide a tax amnesty period to bring corporate profits back into the United States, reform the corporate and individual tax code to make it flatter, fairer and simpler and eliminate capital gains taxes to encourage investment in American companies. These measures would not only have put the economy on solid ground to recover, but they also would have had little to no net effect on the national debt. Now that’s change you can believe in.