Robert Kuttner: Smoking the Green Shoots

[marmar]

from HuffPost:



Robert Kuttner
Co-Founder and Co-Editor of The American Prospect

Posted: July 19, 2009 09:30 PM
Smoking the Green Shoots


Question for the day: Where is the economic recovery going to come from?

We are still at the stage of the recession where economic downdrafts are producing more downdrafts. Reduced purchasing power leads to fewer retail and factory sales and more layoffs, further reducing consumer demand. The Obama stimulus package, about 2.5 percent of GDP for each of two years, doesn't make up enough of the difference. But the federal deficit, caused mainly by falling revenues and not by increased public spending, is alarming the budget hawks. The administration worries, correctly, that deficits will be high for several years to come and wonders who will keep lending Uncle Sam the money. Yet cutting back spending before recovery comes would be suicidal.

In addition, the financial sector has not yet returned to health, despite outsized profits (and bonuses) reported by the likes of Goldman Sachs. This is the kind of purely financial engineering that caused the collapse. The fevered activity at Goldman is a sign of lingering economic illness, not economic health. The rest of the economy, which depends on the financial sector for real investment capital, is still deeply depressed.

Louis Uchitelle's piece in Sunday's New York Times provides some instructive numbers.

Every major sector that reflects the purely private economy has been losing jobs, the only exception being energy extraction plus a tiny increase in computer systems design and management consulting. All of the other expanding sectors that are actually adding jobs reflect government spending - education, health, general government. But the declines in the workhorse parts of the private economy such as manufacturing, construction, and retailing are huge. ...........(more)

The complete piece is at: http://www.huffingtonpost.com/robert-kuttner/smoking-the-green-shoots_b_240395.html

[The_Casual_Observer]

1. Recovery from 82 recession was lead by the invention of the IBM PC

and cheap gas courtesy of the Iran -Iraq war. Recovery from 92-93 recession was lead by the tech boom, internet & relative peace in the ME which lead to cheap gas in the 92-98
period.


Are the days of cheap gas over?