walter russell mead peter berger lilia shevtsova adam garfinkle andrew a. michta
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Recession Inches Closer

The past four years have been dismal for the dismal science. After mostly failing to predict the largest economic crash since the Great Depression, economists have responded by repeatedly failing to anticipate shifts in the major economic indicators—like the unrealized predictions of a strong recovery in 2010 and the upswing of the past few months, which has outperformed expectations by a sizable margin.

Now that the recovery is gathering steam and smart forecasters are beginning to bet on robust growth this year, we hate to be the bearers of bad news to confuse the economists’ prognostications: Retail sales have dropped over the past few months and gas prices have risen, according to the Wall Street Journal. Rising gas prices and falling gas consumption are never good for an economy. Combined with the sour consumer spending news and Europe’s ongoing cliff-teetering, they could knock the recovery flat on its back.

We’re not out of the woods yet.

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  • Kenny

    Yes, Mr. Mead, a recession inches closer.

    As of this writing, oil prices are a bit over $101 a barell. And since there is a tight correlation between $100 oil and a recession, an economic downturn could be fast upon us.

  • WigWag

    Via Meadia may think that the revelation that we are not out of the woods yet is treanchant analysis but my guess is that this is pretty self evident to everyone including prognosticators with a degree in the dismal science. I’m not so sure that Via Meadias assertions about gas prices are all that sophisticated either. Higher gasoline prices frequently accompany economic expansion; in fact they are a harbinger of a growing economy. That rising gas prices may cause demand to fall in an economy that is still teetering is hardly a great revelation either.

    No, the economy is not out of the woods yet; is that supposed to be news we can use?

  • Bart Hall (Kansas, USA)

    I noticed this morning that according to recent Bureau of Labor Statistic figures, real (inflation-adjusted) household median income has since 2008 fallen back to 1995 levels. Those are also about the same as the 1989 peak of the Reagan boom. The BLS expect prevailing trends to continue (or perhaps even accelerate) through 2012, which would mean that median income levels are likely to fall to something like 1992 recession levels, which equal those of 1985 on the way up.

    In other words, we are somewhat less than a year away from having wiped out an entire generation’s median income gains in just four years, beginning in early 2009. Is it any wonder that most small businesses have already seen sales decline by between 15% and 70%? Where will they be likely to go this year?

    The BLS also predict than in addition to continuing declines in median household income, any wiggle room in that income will be applied overwhelmingly to decreasing debt, attempting to save, soaring energy costs, and rising food expenses.

    Discretionary spending — restaurants, nice clothing, personal travel, and such — is expected to suffer sharply.

  • Tom Gates

    WigWag, it is obvious that you are not watching the News! According to the mainline press and the stockmarket, Happy Days are here again! We are seeing the President now beating any contender by 6 percentage points!THe President will have no problem getting his budget through, spread that cash around and on to 95 more rounds of golf and mayhem. Why let a couple of negatives get in the way of that story!

  • Anthony

    Two economic narratives WRM have been proposed as factors: 1) demand has collapsed because of high debt accumulation; 2) fundamental capacity to grow (manufacturing) by making useful things has declined. Now, to challenge and change these narratives with appropriate economic diagnosis may be one of our economic recession wake up calls going forward.

  • Mrs. Davis

    Any significant recovery will have to include a rise in new house construction. We are now at the bottom of the house price decline. There are plenty of foreclosures to be made now that the governments have cut a deal with the banks. We are at least 2 years from a rebound in housing.

    And then there’s Europe and China. And the Fed.

    The next president will face an economic situation as difficult as the current one. And if Baraq is the next one, he will leave office with the economic reputation Roosevelt should have had had he not been rescued by Hitler. At least Baraq is term limited even if Khamenei tries to duplicate the favor.

  • Charming Billy

    It’s felt like recession to me, at any rate, ever since the halcyon Summer of ’08 when I, no lark more blithe than me, left my great full time job in order to relocate closer to my wife’s aged parent, blissfully ignorant of what was coming in the Fall. I’ve haven’t had a full time job since. If you’re looking to fill a full time librarian AKA “Information Professional” position, just let me know. I’ll work anywhere. I’ve even interviewed at a maximum security prison and a hospital for the criminally insane (they don’t call ‘em that anymore, BTW, especially when you’re interviewing for a job in one) and I would have gladly taken either job.

    Sorry, no substantive comments about the upcoming recession. Just complaints.

  • Tom Holsinger

    $5 a gallon gasoline means the GOP will have 60 or more Senate seats in the next Congress.

  • Lexington Green

    One contrary data point. A person in the know tells me that railroad freight bookings are increasing in the coming months, and this is usually a leading indicator of an expanding economy. Make of that what you will.

  • Lexington Green

    This article says the same thing about railroad data. “All of our customers that we talk to would tell you what we’re saying, that they don’t see extraordinarily robust growth in the immediate future or in 2012, but neither do they see anything which would portend a downturn …” I hope this is correct.

  • Kris

    “We’re not out of the woods yet.”

    Is Hope’n’change still President?

    Mrs. Davis @6, as I said a while back, proof that term limits are racist. [/sarc]

  • Mrs. Davis

    Trucks (pdf) are down, trains are up. What to make of it? Maybe because North Dakota oil doesn’t move by truck and there’s no pipeline. Cui bono?

  • Jim.

    @WigWag-

    Please think a little more carefully before you post. Rising gas prices would point to a growing economy *if* gas consumption were also rising– that would point to more expensive to extract fields being exploited to match demand.

    The fact that demand is instead *falling* suggests that there is a scarcity premium on gasoline (perhaps caused by envronmental regulations or political unrest in supplier countries) that is forcing people out of the market for gas.

    Take a deep breath, Wiggy, and maybe take a break. Your analyses are turning into knee-jerk opposition.

    Congratulations, Professor. You’ve just seen the first case of Mead Derangement Syndrome. That’s a big milestone in the life of a public intellectual, and tremendously amusing to all your fans. :-)

  • higgins1990

    Most companies are cash heavy with little or no debt. On November 7th, the hounds will be unleashed, and America will burst out of the Obama recession.

  • http://facingzionwards.blogspot.com/ Luke Lea

    Keep it up WigWag. It’s ok to be wrong, and who is to say that you are.

    Median family incomes declining? A better measure of standard-of-living is real hourly take-home pay (after taxes and exclusive of health insurance premiums). That keeps dropping. Trade (w/China), immigration (from Mexico) and our failure to adjust wage-and-hour standards to improvments in productivity are the main contributors to this trend (along with out-of-control healthcare spending of course).

    All four of these factors can be traced to policy failures in Washington DC. The blue model may be obsolete — I think it is — but I don’t think Mead’s “boutique capitalism” is going to solve the problem.

  • http://facingzionwards.blogspot.com/ Luke Lea

    My modest proposal to deal with our declining standard of living: abolish the concept of unearned income along with the corporate income tax, make savings tax exempt, but otherwise treat all income the same, ie, subject to a steeply graduated expenditure tax (expenditure = income minus savings). I might even be willing to contemplate an end to the estate tax in return for the above.

    That’s the revenue side. On the spending side I would get rid of all forms of means-tested transfer payments, replacing them with a vastly expanded earned-income-tax-credit extended to all hourly workers (single or married, with or without children). Social Security would stay (with adjustments in retirement age).

    With these two sets of changes we ought to be able to slice the economic pie more or less as we did a generation ago. Without sacrificing the efficiency of a competitive market economy.

    As for healthcare reform, I haven’t the slightest idea.

  • Mrs. Davis

    The Fed smells recession. And it plans to fight it with the same ineffective tools it has been using.

  • Jacksonian Libertarian

    The Baltic Dry Index is hitting new lows, home foreclosures continue to increase, the Government will suck another $1.3 Trillion from the economy’s operating capital again this year, and the Great Depression 2.0 deflation continues unabated.
    Maybe and I’m just guessing here, we should throw the Blue Model and all it’s supporters under the bus, and return to the limited and CHEAP Government our founding fathers intended with the US Constitution.

  • http://KennethJohnMarks.com Ken Marks

    I recall responding to an article a few months ago where Via Media trumpeted the economic recovery that was supposedly happening. Now, I see, you’ve backed off. No real working person out there, except a few moronic economists, thought the economy was getting better. The guy on main street has known all this time that the economy is not recovering. People have been leaving the work force in droves. Over 1.2 million last month, which accounts for the decreasing unemployment rate. (What a lie the official unemployment rate is!) What we’ve seen is a false spring. Watch it all come crashing down in the next few months as Obamanomics continues to suck the blood out our economy.

  • EvilBuzzard

    http://www.oftwominds.com/blogfeb12/energy-consumption-dropping02-12.html

    It’s not just gas. It’s all energy. Using simple physics, that means less work is taking place in America.

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