SALON

Tuesday, Sep 11, 2012 6:31 PM UTC

WHY IT MATTERS: The Economy

By

Topics: From the Wires,

WHY IT MATTERS: The EconomyFILE - In this Tuesday, Aug. 21, 2012 file photo, job seekers wait in line at a construction job fair in New York. The U.S. economy is weak and the job market brutal. President Barack Obama wants to create jobs with government spending on public works and targeted tax breaks to businesses. Mitt Romney aims to generate hiring by keeping income taxes low, slashing corporate taxes, relaxing or repealing regulations on businesses and encouraging production of oil and natural gas. (AP Photo/Seth Wenig, File)(Credit: AP)

The issue:

The U.S. economy is weak and the job market brutal. Nearly 13 million Americans can’t find work. The national unemployment rate is 8.1 percent, three years after a recession supposedly ended. A divided Washington has done little to ease the misery.

___

Where they stand:

President Barack Obama wants to create jobs by keeping income taxes low for everyone but the wealthiest; by spending more on public works; and offering targeted tax breaks to businesses. Mitt Romney wants to keep low tax rates for everyone, including the wealthy; slashing corporate taxes; relaxing or repealing regulations on businesses; and encouraging production of oil and natural gas.

___

Why it matters:

The economy didn’t take off when the Great Recession ended in June 2009. Growth has never been slower in the three years after a downturn. The human toll is immense. Forty percent of the jobless— 5 million people — have been out of work for six months or more, their skills eroding and their chances of finding good jobs fading. Federal Reserve Chairman Ben Bernanke has declared long-term unemployment a “national crisis.” Millions of Americans have given up looking for work.

The agonizing recovery is the consequence of the deepest recession since the 1930s. The economy lost a staggering 8.8 million jobs and has only clawed back 4.1 million, or 46 percent. A financial crisis dried up credit. Collapsing house prices destroyed $6.5 trillion worth of home equity — the biggest source of wealth for most families. More than 1 in 5 homeowners is stuck with a house worth less than the mortgage on it. Feeling poorer, families have limited their spending and paid down debts. The weak job market has let employers keep wages low. For most Americans, pay hasn’t kept up with modest inflation.

Weeks after taking office, Obama pushed $862 billion worth of tax cuts and government spending programs through Congress. The package was meant to generate economic growth and revive hiring. Romney and other Republicans have declared the stimulus program a failure. But most economists — and the nonpartisan Congressional Budget Office — say it kept unemployment from going even higher.

Still, faced with a persistently sluggish economy, Obama proposed another plan last year to rev up hiring with increased spending on public works projects and tax breaks to small businesses. But most of his $447 billion jobs plan went nowhere, blocked by congressional Republicans who say government programs to help the economy accomplish little other than swelling the $11.2 trillion federal debt — $16 trillion if you include money government agencies owe each other.

They advocate lower taxes and fewer government regulations. Specifically, they want to repeal Obama’s health care law and a law that tightened regulations on Wall Street.

With the politicians paralyzed, the Federal Reserve has stepped in, pushing short-term interest rates to zero and pouring more than $2 trillion into financial markets by buying Treasury debt and mortgages. The central bank’s actions may have kept the economy from slipping back into recession, but they have not stimulated healthy economic growth.

Republicans and Democrats will have to find some common ground before the year ends to prevent the economy from falling off a “fiscal cliff.” If they don’t reach a budget deal, about $1.2 trillion in spending cuts and tax increases will start to kick in next year. The threat of the fiscal shock is meant to force Republicans and Democrats to compromise. Otherwise, the combination of spending cuts and tax increases probably would send the economy back into recession and drive unemployment back to 9 percent next year, the CBO estimates.

More Paul Wiseman.

Next Article

Related Stories

More Related Stories

Featured Slide Shows

The week in 10 pics

close X
  • Share on Twitter
  • Share on Facebook
  • Thumbnails
  • Fullscreen
  • 1 of 11
  • Lisa Montgomery embraces her nephew Thursday after a tornado tore apart her home in Cleburne, Texas. The twister killed six people and destroyed entire swaths of the North Texas town.
    Credit: AP/LM Otero

  • Jack McMahon, the defense attorney for abortion doctor Kermit Gosnell, speaks outside the Criminal Justice Center in Philadelphia Tuesday. His client was convicted of killing three babies in his clinic, and will serve multiple life sentences.
    Credit: AP/Matt Rourke

  • A photo taken Monday captures Vice President Joe Biden's response to a Milwaukee second-grader's innovative proposal to end America's epidemic of gun violence. This guy!
    Credit: AP/Jenny Aicher

  • Sen. Rand Paul, R-Ky., flanked by a grouper-eyed Michele Bachmann, addresses the IRS' admission that it targeted Tea Party groups in advance of the 2012 election. In an op-ed for CNN Thursday, the Kentucky senator slammed the president for his faux outrage.
    Credit: AP/Molly Riley

  • Ousted IRS chief Steven Miller is sworn in on Capitol Hill Friday. Miller testified before the House Ways and Means Committee on the extra scrutiny the agency gave conservative groups applying for tax-exempt status.
    Credit: AP/J. Scott Applewhite

  • Attorney General Eric Holder pauses as he testifies on Capitol Hill before the House Judiciary Committee Wednesday. Holder is under fire, among other things, for the Justice Department's gathering of phone records at the Associated Press.
    Credit: AP/Carolyn Kaster

  • O.J. Simpson sits during an evidentiary hearing at Clark County District Court in Las Vegas, Nev., Thursday. Simpson, who is currently serving a nine-to-33-year sentence in state prison for armed robbery and kidnapping, is using a writ of habeas corpus to seek a new trial.
    Credit: AP/Las Vegas Review-Journal/Jeff Scheid

  • Major Tom to ground control: On Sunday astronaut Chris Hadfield recorded the first music video from space, a cover of David Bowie's "Space Oddity."
    Credit: AP/NASA/Chris Hadfield

  • When it rains it pours. President Barack Obama speaks during a news conference Thursday with Turkish Prime Minister Recep Tayyip Erdogan, inexplicably inspiring an #umbrellagate Twitter meme.
    Credit: AP/Jacquelyn Martin

  • A smoke plume rises high above a road block at the intersection of County A and Ross Road east of Solon Springs, Wis., Tuesday. No injuries were reported, but the the wildfire caused evacuations across northwestern Wisconsin.
    Credit: AP/The Duluth News-Tribune/Clint Austin

  • Recent Slide Shows

  • Share on Twitter
  • Share on Facebook
  • Thumbnails
  • Fullscreen
  • 1 of 11

Related Videos

Comments

 0 Comments

Comment Preview

Your name will appear as username

You may use these HTML tags and attributes: <a href=""> <b> <em> <strong> <i> <blockquote>

follow salon

Most Read

Popular on Reddit

links from salon.com

vote
Journalists file suit against Manning's trial secrecy: Plaintiffs including Glenn Greenwald and Julian Assange demand press, public access to trial and documents
168 points169 points | comment
vote
Kaitlyn Hunt refuses plea offer, will go to court over high school relationship - The 18-year-old rejected a deal that would have labeled her a sex offender and placed her under house arrest
157 points158 points | 84 comments
vote
Kaitlyn Hunt refuses plea offer, will go to court over high school relationship - The 18-year-old rejected a deal that would have labeled her a sex offender and placed her under house arrest
148 points149 points | 98 comments
vote
Report: Nearly a quarter of Americans struggle to afford food
143 points144 points | 13 comments
vote
Ted Cruz against the world - How the Junior Senator is igniting the GOP civil war
78 points79 points | 21 comments

From Around the Web

Presented by Scribol
listener_new_rect The Listener: Chekhov's story mirrors Russia's own

Recommendations