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Recession or depression? To be determined

Views on the Economy

January 14, 2009
According to an article in The Washington Post, the jobless rate has now jumped to 7.2 percent. But that number, according to some economists, may not show the degree by which the job market is sliding away.

The high unemployment rate caused stocks to fall sharply Friday and indicated that many Americans will be living with tighter budgets and spending even less money. Some economists believe unemployment could rise to double-digits before it's all said and done.

The Labor Department's unemployment report, long-awaited by many, indicated that 524,000 jobs were cut in December, shoving the unemployment rate to a 16-year high. Rising unemployment usually tends to reduce consumer spending, which makes up more than two-thirds of the country's economic activity. In 2008, there were 2.6 million-plus jobs lost, the most since 1945.

Another article, by Neil Irwin and Dan Eggen, states the number of jobs in the United States increased by only about 2 percent during President Bush's tenure, the slowest growth over an eight-year span since data collection began 70 years ago. Gross domestic product, a measure of economic output, grew at the slowest pace for an eight-year period since the Truman Administration. And America's incomes grew more slowly than in any presidency since the 1960s, other than that of Bush's father.

Bush and his advisors point out that there were 52 straight months of job growth in the middle of this decade, and that the economy expanded from 2003 to 2007. But economists, including some advisors to Bush, say it looks as if the nation's economic expansion was driven by the booms in the housing market, consumer spending and financial markets. And many believe those booms, which the Bush Administration harked with the idea of an "ownership society," have proved unsustainable.

"It's sad to say, but we really went nowhere for almost 10 years," said Mark Zandi, a chief economist of Moody's Economy.com, and an informal advisor to John McCain's campaign. "It's almost a lost economic decade."

Some people who were around for the Great Depression believe the factors that contributed to the stock market crash in 1929, and the following economic depression, are similar to the ills of the present economy — the high unemployment numbers and a reduction in spending. But, others believe that, although it's accepted now that a recession is upon us, the Great Depression is in our past and the lessons learned from it will keep anything like it at bay.

"Those were hard times," Novy Gilliatt, 84, who lives near Grantsburg, said. "I'd hate to see people have to go through something like that again. When I think about it now, I realize how many people live in the big cities these days and can't raise a garden or help themselves if times get real hard again. Back then, there was very little to buy and very little money to buy it with. But somehow, people managed to find enough to eat and stay alive. But not many people had anything extra, and if they did, they shared what they could."

Gilliatt, although young at the time, remembers seeing a lot of people who were worse off than his family, and remembers some who never lifted a finger to help themselves.

"I remember seeing men walking down the road with an old rooster or maybe a couple of hens thrown over their shoulders, on the way to town in hopes of trading for a little flour or maybe some baking powder," Gilliatt said. "Most of us were barefoot, but we were lucky and had shoes to wear to church on Sunday. A lot of kids didn't. But most people around here were able to somehow hang on to their little farms.

"I remember some older folks drawing a pension of $6 a month and somehow got by," he continued. "And I remember my mother giving us a few bread crumbs, and my brothers and me would use them to lure chub minnows into a trap. Then, we'd use them for bait to fish in the Patoka River.

"There wasn't any deer back then, but a lot of people hunted squirrels and rabbits. You didn't hunt for the sport of it back then, but for food — for something to eat. We had a limit of five squirrels, but there was no game warden around and we would kill up to 10 at a time. And there was a few people who just sat down and waited on someone to take care of them. We had some neighbors who were that way, but most people did what they could to take care of their families."

There also were a lot of people who were considered "hard-headed" and "independent" and were reluctant to accept help from anyone.

"One time my Uncle Roy came up the hill carrying a sack with several cans of beef in it — government commodities — and gave my mother a couple of cans of it," Gilliatt said. "He called it 'Roosevelt Beef.' She fixed it for us and when my dad got home, we ate supper. I remember my dad saying, 'Well, that was pretty good, but we don't want anymore of it.' He had a lot of pride."

The present economy, economists say, slipped into a recession in December 2007, and the 12-month downward spiral is already the longest since the 1980s. If it lasts more than 16 months, it will be the longest recession since the Great Depression. Will it eventually become a depression? No one seems to know for sure, but even the word "depression" evokes worry in people who lived through it.

"My dad had a Model T garage when the Depression began," Mayme Ruth Laswell, who lives near English, said. "It didn't take long for him to go out of business. We moved to Illinois for a while, and my dad worked for his brother in a store. He got laid off and sold magazines for a while, but people wanted to trade food for the magazines and he needed money for gas, so that didn't work out.

"We came back to Indiana and lived out in the country. My brothers loved it — they had a regular adventure — hunting and fishing and climbing the hills, but there wasn't much for a girl to do. We didn't have any electricity, and my mother, who had a washing machine in Illinois, had to wash clothes on an old washboard. We had to walk to the post office at Sulphur, which was about three miles. I remember a lot of people saved money back then, a few pennies at a time, and it was called 'sugar bowl money.' But most of them lost that, too.

"The government provided a $500,000 revolving fund to help Wall Street, but it didn't work. Things just kept getting worse. I remember seeing people lined up in a soup line near a hotel," Laswell said. "Some people were given pencils to sell on the streets. Dad worked on the roads or whatever he could get for a day's work. It was a hard time. I was in the sixth grade when the stock market crashed. One girl that I knew, her dad went to the basement and hung himself."

Franklin D. Roosevelt was elected president in 1932. He introduced a number of major changes in the structure of the U.S. economy, using increased government regulation and massive public-works projects to promote a recovery of the economy. But high unemployment and a slow economy continued, although on a smaller scale, until World War II, which greatly reduced the unemployment rate.

"When Roosevelt was elected and started his works programs, the WPA, it was a lifesaver for a lot of people," Gilliatt said. "Some were against it, like some always are, but it worked. This new guy, Obama, has got his work cut out for him. They've been giving all this bailout money to the banks, and with no oversight. It's quite a mess. But we'll all have to help and support him however we can. That's our only hope."

(Lee Cable may be reached at 738-4552 or lcable@clarionnews.net.)

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