Economic historians will look back on this era as a time when policy-makers damaged Americans' welfare with ideologically driven, self-inflicted wounds.
On Monday, the House finally passed a deal to raise the debt limit after weeks of wrangling with a cadre of reactionary, Tea Party-endorsed lawmakers. The measure, which will force some serious cuts to public spending, is expected to easily pass in the Senate. When it does, a painful second "dip" into recession becomes far more likely -- all the conditions are there.
Last week, a depressing report on economic growth caught many observers by surprise. The take-away was that gross domestic product (GDP) – the measure of economic activity within our borders – has been growing at a snail's pace in the first half of this year -- far slower than analysts had predicted. Researchers at the Federal Reserve tell us that since 1947, about half of the times we've had six months of growth as weak as we've seen in 2011, the economy sank into recession in the following year. But many of those slow periods occurred in a different era; today, with Washington obsessed with cutting spending, the chances are certainly greater than 50/50.
We got into this recession when the American people lost not only jobs, but also $14 trillion in wealth during the crash, and pulled back on spending as a result. But we're stuck treading water, two years after the “recovery” officially began, in large part because of the age of austerity – due to cuts forced on us by this misguided and shortsighted view that large deficits are a cause, rather than an effect, of the downturn.