The 'Financial Recession' Excuse

This post goes hand in hand with the Bespoke data I laid out in [February 22, 2012 Recoveries Don't Get Much Weaker Than This].  What we are trying to look at here is why this recovery has been so much weaker than previous recoveries from the 1907 banking crisis, to the Great Depression, to the recession of 1981-82? 


The story from the WSJ focuses on policy decisions made that has made this recovery so lackluster.  You have to ask yourself with the trillions in stimulus spent are we better off today than we would be if we didn't go this much further into debt?  I believe that we are setting ourselves up for bigger issues and harder decisions down the road by taking on the trillions of additional debt.


Via the WSJ

• Never before in postwar America has either real per capita GDP or employment still been lower four years after a recession began. If in this "recovery" our economy had grown and generated jobs at the average rate achieved following the 10 previous postwar recessions, GDP per person would be $4,528 higher and 13.7 million more Americans would be working today.
• Behind the startling statistics of lost income and jobs are the real and painful stories of American families falling further behind: record high poverty levels, record low teenage employment, record high long-term unemployment, shrinking birthrates, exploding welfare benefits, and a crippled middle class.
• But, in fact, the 1981-82 recession was deeper and unemployment was higher. Moreover, the 1982 recovery was constrained by a contractionary monetary policy that pushed interest rates above 21%, a tough but necessary step to break inflation. It was also a recovery that required a painful restructuring of American businesses to become more competitive in the increasingly globalized economy. By way of comparison, our current recovery has benefited from the most expansionary monetary policy in U.S. history and a rapid return to profitability by corporate America.
• The most recent excuse for the failed recovery is that financial crises, by their very nature, result in slower, more difficult recoveries. Yet the 1981-82 recession was at least in part financially induced by inflation, record interest rates and the dislocations they generated. The high interest rates wreaked havoc on long-term lenders like S&Ls, whose net worth turned negative in mid-1982. But even if we ignore the financial roots of the 1981-82 recession, the financial crisis rationalization of the current, weak recovery does not stand up to scrutiny.
• It is certainly true that the economy languished in the Great Depression as it has over the past four years. But today's malaise is similar to that of the Depression not because of the financial events that triggered the disease but because of the virtually identical and equally absurd policy prescriptions of the doctors.
• Tax policy then and now was equally destructive. The top individual income tax rate rose from 24% to 63% and then to 79% during the Hoover and Roosevelt administrations. Corporate rates were increased by 36%. Under Mr. Obama, capital gains taxes are set to rise by one third, the top effective tax rate on dividends will more than triple, and the highest marginal tax rate will effectively rise by 21.4%.
• Faced with the failed results of his own governing strategy of tax, spend and control, the president will have no choice but to follow an election strategy of blame, vilify and divide. But come Nov. 6, American voters need only ask themselves the question Reagan asked in 1980: "Are you better off than you were four years ago?"