It’s seems ever clearer that there is no “Recovery Summer” in store this year for America’s economy. The problems of the last few years haven’t been solved. What will happen next is disputed, between those who see a second recession, those who see growth so weak it will feel like a recession, and those who speculate about a depression. This last group is in the minority; then, those politicians who were talking about a summer of recovery are fewer in numbers each day, too.
Over at CNBC, there’s a story about major banks, entitled, Banks Too Big to Fail, Too Big to Bail Out: Roubini that considers some of these predictions.
Reading the story, and watching the embedded video at the CNBC website, for example, one sees that among the panelists there’s no consensus other than that there are rough times ahead.
Governments are running out of ways to counter a “massive slowdown” or the risk of a double-dip recession, [economist Nouriel] Roubini said.
“A year ago we had all these policy bullets,” he said. “We could push down rates to zero, we had (quantitative easing), we could do a budget deficit of 10 percent of GDP (or) backstop the financial system.”
“Banks at this point are too big to fail, but also too big to be bailed, especially in Europe where the sovereigns are in trouble and therefore the ability to backstop the financial system is not there,” he said.
Roubini said he was unimpressed with the June US employment report, pointing out that the jobless rate fell because of a large number of discouraged workers leaving the labor force, and also noted recently weak data on manufacturing, retail sales and housing….
While not predicting a double-dip recession, with economic growth at a rate of 1.5 percent [Roubini’s prediction for the second half of 2010] “everything becomes worse,” Roubini 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.
It’s a genuine test of determination and ingenuity — an economic problem where conventional solutions have proved ineffective. It’s more than that, however — many politicians and bureaucrats will have to discard previous methods if they wish to preserve their local economies and assure a solid return to prosperity.
I think it’s a test that some will fail, but that others will decline to take, so to speak. To change course would be to admit that years or decades of thinking one way were always mistaken, or no longer effective. It would mean the abandonment of big projects with small rewards. many communities will have leaders who shift course; others will stay on their current path.
They’ll not continue doing more of the same because it’s best for community prosperity, but because their pride will make any other course inconceivable. They’ll choose relative poverty and ignorance for their communities over an honest admission of mistaken economic meddling.
In this effort, they’ll make every effort to blame the national economy for their cities’ and towns’ misfortunes. As not all towns will suffer equally, this effort at blamecasting will prove deceptive. Problems felt locally will have many local, and not merely national, origins.
There are many solid ways out of this predicament, beginning with a municipal government about a third smaller, the end of tax incremental financing schemes, and the abolition or suspension of countless fees and fines. There’s much more to write in this regard during budget season, but we can be optimistic that a permanently smaller and more reasonably limited government would be more stable and less burdensome to community prosperity.
