We're not in a double-dip recession yet. We're in a one-and-a-half-dip recession.
Consumer confidence is down. Retail sales are down. Home sales are down. Permits for single-family starts are down. The average workweek is down. The only things not down are inventories — unsold stuff is piling up in warehouses, and inventories of unsold homes are rising — and defaults on loans.
The 1.5-dip recession should be causing alarm bells to ring all over official Washington. It should cause deficit hawks to stop squawking about future debt, Blue Dog Democrats to stop acting like Republicans, and mainstream Democrats to get some backbone.
The 1.5-dip recession should cause the president to demand a large-scale national jobs program, including a new WPA that gets millions of Americans back to work even if government has to pay their wages directly. Included would be zero-interest loans to strapped states and locales, so they didn't have to cut vital services and raise taxes. They could repay when the economy picked up and revenues came in. The national jobs program would also include a one-year payroll tax holiday on the first $20,000 of income.
The president should stop talking and acting on anything else — not the deficit, not energy, not the environment, not immigration, not implementing the healthcare law, not education. He should make the whole upcoming midterm election a national referendum on putting Americans back to work, and his jobs bill. Are you for it or against it?
But none of this is happening. The hawks and Blue Dogs are still commanding the attention. Herbert Hoover's ghost seems to have captured the nation's capital. We're back to 1932 (or 1937), and the prevailing sentiment is that government can't and mustn't do anything but aim to reduce the deficit, even though the economy is going down.
It looks like there'll be an extension of unemployment benefits. (If it weren't for the human suffering involved, I wish the Republicans had been forced to filibuster that bill all summer and show the nation just how much they care about people without jobs.) But the fiscal stimulus resulting from this will be tiny. Jobless benefits are humane, but they alone don't get jobs back.
And what about the Fed? It's the last game in town. The 1.5-dip recession should cause Ben Bernanke to revert to buying mortgage-backed securities, buying Treasury bills, buying anything that will get more money into circulation.
But the Fed chair continues to talk about pulling money out of the system and raising short-term rates as the economy improves. During Wednesday's appearance before Congress, he made it clear monetary policy won't be loosened; it just won't be tightened for a while. And he reiterated that deficits were "unsustainable."
He admitted unemployment would probably remain high for a long time, and the likelihood of growth was "weighted to the downside," which in Fed-speak means we're still in trouble. And he said the Fed still has the tools to do what's needed if the economy needs more help.
But would he use the tools now? No. "We need to look at them carefully to make sure we're comfortable with any steps that we take." This is like the captain of the Titanic looking carefully at his lifeboats to make sure he's comfortable with using them as the ship starts sinking.