It Will Take Years Before the Current Recession Will End
By Michael D. Intriligator
Many are predicting that the current recession will end soon, by this summer, later this year, or at most next year. We don’t believe this prediction, which we see as largely politically motivated or self-serving and reflecting wishful thinking. Instead, we believe that it will take years for the recession to end unless major reforms are initiated that go well beyond current policy initiatives. Here are some of our reasons:
• The failed attempt to remedy the situation by TARP and its successor, the US Treasury’s private-public partnership plan, making the mistake of trying to fix the economy from the top down, by putting enormous federal funds into major banks and non-bank financial institutions rather than from the bottom up, through funding homeowners and small businesses
• President Obama’s economic stimulation plan, the American Recovery and Reinvestment Act (ARRA), despite doing many useful things for infrastructure, the environment, housing, health, etc. being insufficient to stop the downward economic spiral
• GM, Chrysler, and other major corporations in or near bankruptcy and substantially downsizing, with repercussions on their employees, suppliers, dealers, and local communities
• States, cities, and counties all facing enormous deficits and downsizing with furloughs, layoffs, and reductions in expenditures
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