With 2012 here, many people are understandably growing weary of the U.S. financial crisis. When will the economy get better? How does the debt crisis in America inform the U.S. financial crisis? And perhaps more ominously–will the economy get better…ever?
Debt Crisis in America
Last year saw the debt crisis in America come to a head. After much wrangling in the Senate, a debt-ceiling bill was passed. This allowed the government to continue borrowing more money.
One tangible result was a downgrade in the federal government’s credit rating. Further downgrades loom on the horizon.
U.S. Financial Crisis: The Good News Ain’t So Good
To be fair, there are some metrics that hint around an answer to the question “When will the economy get better?”
Consumer confidence is up, which is good: One reason the economy has been hit so hard is that people are afraid to spend money. Still, this is a subjective metric. To use a crude analogy, a cancer patient could feel better about their illness, but it wouldn’t make them any more well.
Another metric, much touted by the administration, is a jobs report. The report shows fewer people claiming unemployment benefits than in previous months. However, as has been pointed out, this had more to do with people becoming ineligible for unemployment than it did with any actual increase in the number of people employed.
Further, real wages have actually declined on Obama’s watch, while many people report having trouble finding good-paying positions in their field. A former computer programmer or construction worker can’t really be said to be “employed” because they found a part-time job at a gas station.
Financial Crisis Inquiry Commission Findings
The Financial Crisis Inquiry Commission, also known as the Angelides Commission and the New Pecora Commission, was made to explore the reasons for the financial crisis. Some of its key findings include:
- There were clear indicators of a looming financial crisis before it actually happened.
- The Securities and Exchange Commission, Federal Reserve Bank of New York and other government agencies were not properly regulating banks.
- Banks and other corporations suffered from “dramatic failures of corporate governance,” acted recklessly and pursued short-term gain over sustainable growth.
- American consumers and companies spent too much money and didn’t save enough.
- Borrowers lied on applications and lenders gave out loans they knew could never be repaid.
- Credit rating agencies in particular acted irresponsibly.
In short, the entire regulatory and oversight system for banking was broken.
So When Will the Economy Get Better?
When the economy will actually improve in ways that affect ordinary Americans is anyone’s guess. In fact, the current Great Recession resembles the Long Depression of the 19th Century more than it does the Great Depression of the 20th Century.
Known as “the Great Depression” until an even greater one came along, the Long Depression was 20-plus years of stagnation following an unprecedented technological boom and currency bubble. As fears of a double-dip recession mount, economic historians continue to look closer at this obscure event for answers about the current economic situation.
The Way Out of the U.S. Financial Crisis
To get out of the American–and global–financial crisis, jobs are first and foremost needed.
While “big government” is a sort of national boogeyman in the United States, it’s worth noting some “big government” projects that have provided both jobs and innovation: The Interstate Highway System and the Hoover Dam are two government projects that can hardly be said to have not worked.
Indeed, even those who don’t use the IHS benefit from the streamlined travel they provide in the form of faster transportation of goods.
President Obama campaigned, in part, on a massive public works project to provide jobs. With American infrastructure in bad shape, it’s hard to argue that there’s any shortage of things for the unemployed to do at a living wage.
But how to pay for it? The federal debt crisis is a very real thing, not the figment of some Senator’s imagination. While often derided as “class war,” it’s hard not to see a solution to this problem in higher taxes on corporations and the wealthy.
With the Wall Street Journal reporting $10 trillion in hoarded cash and Reuters reporting 30 corporations that paid no income taxes for three years, it’s hard for the dominant “trickle down” arguments of the last 30 years to carry much water.
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