The economic slump goes on and on and ...

• Author: Thomson, James W.
• Position: ECONOMICS

DURING THE UNHAPPY winter of 2008-09, the global economy teeterred on the brink of a complete breakdown. The financial crisis, which began in 2007 in the U.S. with its toxic subprime mortgages, spread quickly to Europe and then threatened to engulf the rest of the world. In the darkest period in early 2009, the U.S. was shedding 700,000 jobs a month, world stock markets plunged, millions of workers lost their livelihoods, international Wade slumped, and our Federal government began to spend billions of dollars to shore up the faltering economy. Anxious pundits proclaimed that this financial debacle signaled the end of capitalism, as the economic carnage continued until the summer of 2009--until the Great Recession officially was judged to be over by a clearly overly optimistic agency. Perhaps as many as 10,000,000 American jobs were eliminated during the crisis; in 2010, some 15,000,000 workers were unemployed while another 12,000,000 either were underemployed or had withdrawn from the labor market altogether.

In the last year and a half, the U.S. economy has achieved modest gains, with the conspicuous exception of the weak job market where nearly 30,000,000 Americans are facing the most grueling times since the Great Depression. It should prove to be quite difficult to replace the estimated 8,500,000 lost positions, in addition to creating another 150,000 jobs needed each month for new entrants into the labor force. A little algebra suggests that, even if the moribund economy somehow could rebound and generate 3,000,000 new jobs each year, it still would take about seven years to restore full employment.

However, the economy has sputtered and fallen far short of creating 3,000,000 jobs per year. Given the nature of our "hire and fire" culture, coupled with the U.S.'s minimal safety net provisions (the recent extension of Federal unemployment benefits notwithstanding), the plight of the nation's workers appears particularly bleak. Even Pres. Barack Obama's economists--who duly are required to be cheery--glumly have conceded that it could take many years to achieve a complete economic recovery.

Not surprisingly, at the midterm elections, American voters responded by electing a Republican House of Representatives and fell just short of achieving a Republican Senate. This new Congress surely will not pass another round of enormous deficit spending bills inspired by the theories of the heralded British economist John Maynard Keynes. The mammoth...