Recession 2007

According to the National Bureau of Economic Research, recession is defined as "a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales. A recession begins just after the economy reaches a peak of activity and ends as the economy reaches its trough" (http://www.nber.org/cycles/recessions.html). After a slight recession in 2001, the NBER declared that the U.S. had been in a recession since December of 2007.

After the longest period of expansion in record history, a recession came upon the United States in the early 2000s. According to http://recession.org/history, the "collapse of the dot-com bubble", the 9/11 attacks and other events contributed to a "mild contraction" in the economy from April of 2000 to October of 2001. However, according to the NBER, we had a recession starting in March of 2001 to November of 2001; which was "less than the average duration of recessions since World War II" (http://www.nber.org/cycles/recessions.html). Mark Feldstein, CEO of NBER, told the Boston Globe that the last time we were ever in an economic situation this bad was back during World War II (http://www.boston.com/business/articles/2008/03/15/recession_is_here_economist_declares/). Many would say that this recession did not have a full recovery as many were still unemployed or had to take a lower-paying job.

President George Bush and Vice President Dick Cheney both agreed that they had inherited the recession when they were inaugurated in 2001; that the recession had been the fault of former President Bill Clinton. In response to this recession, President Bush called on Congress to quickly pass an economic stimulus – consisting of assistance to unemployed workers and another round of tax cuts – so that he could "sign it before Christmas" (http://money.cnn.com/2001/11/26/economy/recession/). The package was passed in the House but not in the Senate as the former Majority leader Tom Daschle said that the package "promoted by President Bush appears dead in the Senate" (http://www.voanews.com/english/archive/2002-02/a-2002-02-06-11-Congressional.cfm). However, on March 9, an economic stimulus package was finally signed. In an article on the White House website, the Council of Economic Advisers wrote that President Bush’s 2001 Economic Growth and Tax Relief Reconciliation Act was what gave Americans "a greater share of their own money to spend on" whatever they may prefer. They also said that it "softened the recessionary headwinds in 2001 and…helped to put the economy on the road to recovery" (http://www.whitehouse.gov/cea/TaxReliefActUpdate_Feb02wp.pdf). Some people however said that it was the $1.35 trillion tax cut that gave our economy the final push into recession.

I do not believe that tax cuts will work this time. Although it may give Americans more money back into their hands to spend, I feel as if they would be too scared to spend it after how the media has portrayed this recession and after the incomplete recovery from the 2001 recession. In addition, the constant bailouts of companies do not really give the people the sense of security that they can spend their money in stores or invest in stocks. Others are waiting for the last minute when stores are about to close so that they can get the cheapest prices possible. A tax cut would just contribute to the growing deficit. With the economy in the shape it is in now, even if money were to come back, some companies would not be able to borrow the amount of money they need to hold back from filing for bankruptcy. Then there would be no more stores to spend money at or stocks to invest in. However, it also is true that when people get checks back in the mail, they tend to spend it within the year (depending on how much rebate they receive). As costs for everyday commodities are going up, so does bills and debt that people have which is what people should be spending their rebate checks on.

The fact that the recession (beginning in December 2007) was officially declared on December 1, 2008 confused me. I had no idea why they would declare this slump a recession a year after it officially began. Then, after doing some research for this, I figured out that "the official designation of recession may not come until after we are in a recession for six months or even longer" (http://recession.org/definition). Most people probably still do not even know that and looking at blogs and at comments readers left, they seemed as if they had no idea that recessions are usually declared months after it has begun. Also, I do not think that this declaration was much of a shock to people. People had been feeling the slump already. What they were more curious about was whether we were on the verge of entering another depression or not. I think that the extra time that is given for a recession to be named gives NBER time to accurately think through whether the country is truly in a depression or not. If the recession was declared earlier, this fact could have been a benefit to the democrats in the presidential race. As President Bush stated that the recession in 2001 was former President Clinton's fault, President Obama could have stated that it was President Bush's fault giving him more of an advantage although it would not have had a tremendous effect. If a recession had been declared immediately, the people could have gone into a bigger panic which could have had a greater influence on the markets. A negative impact could be that for those people who do not know that recessions are declared months after it begins, they could lose a little faith in the government to keep them informed. However, I do not think that this was the case as many already knew that the economy was on a downhill slope.

My opinion is that tax cuts are not the methods to follow to get out of this recession. That only deepens the hole we are digging ourselves in for the deficit and also for the other reasons stated above. My suggestion to the President and President-elect would be that searching for alternative fuel and gaining energy independence is a step in the right direction. That would help the economy while also helping the environment in the long run. Although I do enjoy the cheaper gas prices, that only stimulates the people to use more gas to travel domestically because airline prices are so high. That could hurt the economy in the future. Energy independence also keeps the money within the country so that the government does not have to continuously pump more money into the economy to cause a rise in inflation. Also, while bailing out companies do help, it should be done with extreme care so that the companies will not take the money for granted and that they follow all the agreements made in exchange. While the U.S. is one of the largest markets, foreign companies are also expanding. They are using the business of the U.S. to grow rapidly which is slowing the growth of our nation down. Therefore, whether this is a good idea or not, there could be limited trade or limited bases for foreign countries once we have started to become more independent.

I think that in general, this recession could also be good for us. With so much change going on the world this could bring some pride, hope and unity to the country. As one town struggles, the whole nation struggles. This recession is teaching people to save and while the gas prices were high, people were learning to car pool or take public transportation.