I'm ordinarily a huge Robert Samuelson fan, but this morning I've got to demur. In this discussion of the current recession (known for some reason as The Great Recession), Mr. Samuelson spends a few paragraphs talking about the recession, and then toward the end, he says this:
"Another theory -- more powerful, I think -- is that the Great Recession, though jarring to almost everyone, has been most disruptive and disillusioning to those who were previously the most protected. It punctured their cocoons so unexpectedly that they became more cautious and fearful, whereas those who even in good times faced job loss and income shifts (many blacks, the young and the poor) were less surprised. One legacy of the Great Recession is that insecurity and uncertainty have gone upscale. People feel more exposed. They tend to plan for the worst rather than hope for the best. Their reluctance to make major purchase commitments (a new car or home) validates their pessimism by retarding recovery."
Reading the article, I come away with the sense that Samuelson has bought into "the Great Recession" hype in a big way. I'm here to dispute that hype. Front and center for me is what Samuelson brings up in the paragraph above without really meaning to do--and that is, Americans are convinced this recession is "Great" because of how it makes us "feel" and how it makes us "plan", rather than what it does to us on an individual, everyday basis. Looking through THAT lens, this recession doesn't stack up.
Ninety six percent of mortgage holders are making their payments. Ninety percent of those who wish to work (represented by those actually working or seeking work) are working. One hundred percent of those who wish to buy a house or borrow money for any other reason will do so at historically low mortgage rates. One hundred percent of those who purchase goods are doing so in historically low inflation. The point here is that the while the "Great Recession" has been a terrible thing, its impact has been far less pervasive than the recession of the early 80's. I've talked about this before, remember--the one with double digit unemployment, double digit interest rates and double digit inflation--ALL AT THE SAME TIME?
Put another way--anyone who had investments in equities--for retirement or otherwise--has gotten crushed in the past two years. But if you weren't planning on turning to that money for living expenses, the loss--like the gains that preceded it--was on paper. Psychologically damaging, but not financially debilitating. Turning to the housing market--I think it is important once again to stress that the overwhelming majority of people who own houses are making their payments. Something on the order of four percent aren't. Again--even if you are "upside down"--you are STILL gaining the primary benefit of homeownership--shelter--as you ponder the paper value of your home.
This recession--unlike the one in the 80's--is remarkable not for how it ACTUALLY impacted the economy, but for how it makes Americans FEEL about the economy. Confidence in the banking system was devastated. A foreboding sense of the dread at mounting federal debt is pervasive. While the recession of the 80's WAS actually worse than this by any rational measure of everyday impact, it did not raise the specter of systemic failure to the extent that this one does. This recession is only "Great" in its capacity to make us THINK about subjects we previously did not have to consider.
So my beef with Samuelson is one of degree. Referring to this as "The Great Recession" does injustice to a clearly more devastating time in our history. Consistent with our tendency to believe the times in which we live are "unique" and "exceptional", we call our recession "Great" as a way of explaining to future generations why it was that we were forced to save more and live within our means. After all, doing so for any other reason just wouldn't be heroic enough.