Here’s the difference between a recession and a depression as defined by Bloomberg Business News:A recession occurs when a nation’s living standards drop and prices increase. This downturn in economic activity is widely defined as a decline in a country’s gross domestic product for at least two quarters.
A depression is defined as an economic condition caused by a massive decrease in business activity, falling prices, reduced purchasing power, excess of supply over demand, and rising unemployment.If this isn’t the beginning of a depression, it sure feels like one. Just check the daily headlines. On Monday, the Financial Times informed readers that “Gloom deepens as 75,000 global jobs go.” Among the companies laying off people were Caterpillar, General Motors, Sprint Nextel, Home Depot, Pfizer, and Texas Instruments. My guess is the General Motors declares bankruptcy by March.
The Financial Times still called it a recession, but we know what it is, don’t we? And if we just look at the 1930s and see how every move the administration of Franklin Delano Roosevelt made only deepened and prolonged the Great Depression, we will also see what should be done, but won’t be done. Indeed, with every passing day, the Obama administration looks and sounds just like FDR’s.
As to the stimulus bill, here’s what last Monday’s Wall Street Journal had to say about it:
According to Congressional Budget Office estimates, a mere $26 billion of the House stimulus bill's $355 billion in new spending would actually be spent in the current fiscal year, and just $110 billion would be spent by the end of 2010. This is highly embarrassing given that Congress's justification for passing this bill so urgently is to help the economy right now, if not sooner.”
There should be major cuts in the tax rates from the wealthy to the lowest paid job holders. Putting money back in the hands of people will shorten the duration of the depression by stimulating purchasing, investment, and the risks involved in beginning or expanding a business of any size.
While there is talk of tax cuts, it remains just that, talk.
The folks in Washington, D.C., being politicians, are all delusional and guess who’s going to pay the price for that? Phone, fax, email your Senators and Representative, and tell them to put the Recovery Act back on the shelf.
Alan Caruba writes a daily blog at http://factsnotfantasy.blogspot.com. Every week, he posts a column on the website of The National Anxiety Center, www.anxietycenter.com.