Words.
"This is not, after all, a normal recession but a recession prompted by a banking meltdown. To gauge what that means for a recovery, consider the conclusions of a recent International Monetary Fund report that looked at 88 banking crises around the world over the past four decades. It found, on average, that seven years after these crises, the economic output of the affected nations was still 10 percent below what it would have been had the crisis not happened.
In this crisis, of course, vastly more wealth has been destroyed than in a normal downturn. The chief activity of American consumers for the next half-decade at least will be paying down debt. In consequence, a growing number of economists and financiers believe that our nearly 10 percent unemployment rate isn't simply a lagging indicator of the recession but, rather, betokens a long period of economic weakness in which our normal unemployment rate won't be the 4 or 5 percent to which we've been accustomed but more like 7 percent -- high enough to depress wage levels across the broader economy.
...Perhaps most troubling, it's hard to foresee where the next wave of American prosperity will come from. Manufacturing now employs just one in 10 American workers; the vast majority of new jobs in recent decades has come in the service and retail sectors, which tend not to be as productive and don't pay as well. Our two most recent bouts with prosperity were the result not of productive enterprise but of asset bubbles, first in dot-com stocks, then in housing.
So are we to be stuck with enduring high unemployment and the across-the-board income stagnation that accompanies it? Is that our "new normal"? Only if we believe that we are condemned to a cycle of underinvestment in and underconsumption by the American people.
But there's a way to break that cycle: public investment. We need to augment our current stimulus program with further federal investments that restore and build transportation projects and that professionalize and enlarge our child-care and senior-care sectors. We need to do more to bolster "green" construction and manufacturing, and to ensure that such federally backed manufacturing takes place in the United States."
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