We are a long way from what happened in the Great Depression, but if the current situation is not arrested soon, the official number of unemployed could double.
The Obama administration is reluctant to fully reveal the full scope and seriousness of our current economic situation, fearing that a negative assessment could trigger panic selling on Wall Street that would once again send an already fragile economy further south.
Moreover, those around the president and of course the president himself are looking toward the 2012 election. His political DNA tells him to stay positive. After all, he does not want to be another Jimmy Carter.
However, when Washington points to a small spike in the sales of foreclosed homes, it is akin to telling a very sick patient that his fever is down while the disease has not been arrested. Republican hopefuls have offered up very little to effect a bounce in the economy, perhaps believing that if things get much worse, one of them will take office come January 2013.
Adding to the cup of woe is the inter-connectiveness of the world banking systems. If Greece defaults, now a certainty, and with Italy close behind, it is a reasonable prospect that the euro zone will break up. Not since the 1930s has the world economy faced such a dire situation, and no one knows this better than Mr. Obama and the chairman of the Federal Reserve.
The Great Crash of 1929 remains deeply etched in our national psyche, and the word “depression” sends shivers down the spines of everyone. We are a long way from what happened in those dark years, but if the current situation is not arrested and soon, the official number of unemployed could double. Of 153 million workers, 9.2 percent are without work and another 25 million are working part-time. If we add in all those who have stopped looking for work, the number is closer to 17 percent. Adding to the complexity of a situation in which each link in the chain is connected at some level is the rise of inflation in consumer goods, food and of course, the price of fuel. For millions, the winter of 2011-12 will be the winter of their discontent.
Making matters worse is the political bickering in Washington, with each side claiming they and they alone have the solution to get our nation out of debt, which now equals the GDP, $15 trillion. Whatever the outcome of this internecine fighting, belt-tightening is a must — but where is the question.
However much some claim that “big government” and entitlements are the causes of all of our problems, the hard reality is that we depend on the government for many of our needs. When Social Security was put in place in the 1930s, the average American lived 57 years. Today, it is close to 80 and people depend on an entitlement they have paid into over a lifetime. The same is true for Medicare. The preservation of these programs is essential.
With a house divided in Washington, the best we can hope for is a well-managed crisis but few dramatic new initiatives before the election. In the meantime, prepare for more economic agony, more unemployment, the dramatic and heart-stopping rise and fall of the stock market and even with interest rates at all-time lows, less consumer spending, which is 90 percent of our economy. If Obama is re-elected, we can only hope he has the imagination of his idol, FDR.
If the Republicans replace him, we can only hope we do not find ourselves with another Herbert Hoover. What must be done is hard to say, but in a nation that won two world wars, put a man on the moon, remains the beacon of the world and is inherently the richest nation on earth with first-class human resources, a “brain trust” must emerge that can work hand-in-glove with the president and Congress to lead us out of this very difficult time. The stakes are too high to expect divine intervention, akin to praying for rain during a drought.
Sander A. Diamond is a professor of history at Keuka College in New York.