They say the recession was the worst since the Great Depression. There’s no doubt of that,but that doesn’t mean it has to be this bad. It’s already been the worst since then, so we could recover today and it would still be that way. But if many people (myself included) say the worst is over, when will the good times roll? For many, they already are, but for others things are still bad. Some people are stuck in jobs they hate but need, others can’t find any work at all, and no one knows what’s going to happen with all the entitlement programs Washington hasn’t even started fighting about yet. Here are five big reasons the economy is still weak:
Coordination Failure – This is an economics term that basically says everyone needs to work together in order for a recovery to occur or be sustained. Businesses are waiting on consumers to start spending again before they hire more people. But people are waiting to spend their money until there’s more hiring. Neither side will blink first. You can read more about this at BusinessWeek.
Housing Problem #1 – The first issue with housing is obvious, prices keep falling. The home buyer tax credit helped somewhat but with it gone people have stopped buying homes again. So much wealth is still tied up in homes, whether it be with a bank or you, people just can’t move on with their lives until housing stabilizes.
Housing Problem #2 – Many people may be in a position to take a better job, freeing up employment for others or reducing the unemployment rate. But they have to move out of their home and can’t take the financial hit to do it.
Politicking – Even though elections aren’t for another 16 months or so, lines are being drawn in the sand. People up for reelection have to make stances and get stubborn. The supposed days of compromise are over, and that’s saying a lot since we never saw any.
Ideological Stances – We live in a time where every elected or appointed government official thinks they’re an economist. This is largely based on two fallacies. The first is that constituencies eat this up, so it’s self-reinforcing. The second is that many of them actually have ideological economists telling them what to believe. That whole church and state thing will take on a whole new meaning when economists start filing for 501c3 status on religious grounds.
You may be familiar with some of these frictions on our road to recovery. But I want to point on the irony that many of the problems revolve around the people trying to solve them. Congress and the government in general have implied that they can fix the economy for us. Whether it’s staying out of our lives a la Tea Partiers or more stimulus and higher taxes on the wealthy. Many of us sit around waiting to see the promises of our elected. And while we sit, nothing happens. Tune in tomorrow for five more reasons the economy is still weak.
Image: Ed Yourdon