- The Washington Times - Monday, October 13, 2008

COMMENTARY:

As bleak as things look right now, there are reasons to believe we may get through this economic decline sooner than the pessimists’ predictions of one to two years.

We have been through 10 recessions since the end of the 1940s, and the records tell us they averaged less than 10 months when they lifted national unemployment to an average of 7.6 percent. We’re still a long way from that jobless number.

For nearly two years now, the economic forecasters have been saying we’re heading into a recession, and many say we’re in a recession now.


Reports are likely to show we were in one in the last quarter (July, August and September) because exports, the one economic pillar propping up growth, fell due to a weakening global economy. Retail sales are flat or worse, and factory orders and construction have fallen sharply on top of the credit and debt catastrophe that struck banks and Main Street businesses.

The definition of a recession is two back-to-back quarters when the economy is not growing. We had one month (last December) of negative growth, but the economy perked up unexpectedly and resumed its growth, despite those who predicted otherwise.

We grew at a revised 2.8 percent in the second quarter, largely due to the $1.6 trillion a year in U.S. exports in the global economy - one of those rarely mentioned “fundamentals” in our economy that John McCain was talking about and that seemed to upset Barack Obama.

So the professional pessimists and pundits who said we were in a recession last year and earlier this year were flat wrong.

But even a stopped clock is right at least twice a day, and it looks as if they’ll be right in the last half of this year. But how deep will this recession be and how long will it last?

We’re in the endgame of a furious election battle when Democrats are painting as bleak a picture of the economy as they possibly can. Mr. Obama likes to make comparisons to the Great Depression in his campaign speeches, which is silly and irresponsible. At the economy’s lowest point in 1932, stocks fell nearly 90 percent. We’re a long way from that kind of deep decline.

Then there is another one of those “fundamentals” Mr. McCain was referring to earlier - the incredibly productive American work force.

Unemployment has climbed, and we’ve lost - and will lose - several million jobs this year. But unemployment as of August was 6.1 percent - in sharp contrast to the 9 percent to 10.8 percent we endured in the early 1970s and ‘80s when interest rates and inflation hit double digits.

But we have several things going for us in this latest economic decline, and chief among them is Federal Reserve Chairman Ben Bernanke, who wrote the book on what led to the Great Depression. The Fed tightened the money supply then, instead of injecting liquidity into the economy’s banking institutions - and Franklin Roosevelt raised taxes.

Mr. Bernanke and his economic partner Treasury Secretary Hank Paulson won’t make those mistakes. Last week’s half-point interest-rate cut will be followed by others, while the Fed and Treasury continue to make money available to keep the nation’s lending arteries open until we can work our way out of this trouble.

Meanwhile, the Treasury and the Federal Housing Administration have been pushing to renegotiate 200,000 subprime mortgage loans per month for creditworthy homeowners trying to stay in their homes.

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