The Semantics of the Crisis
Most Americans have learned several new terms during the economic crisis. Indeed, semantics have played a large role in trying to ease the public’s fears and manage expectations. First we were told that America (or most of America) was not in a recession. Then we were (but we were not in a depression). Next we were told that the recession ended in May 2009, then in July 2009 and then in September 2009, etc. (although, for the record, the recession is not really over until NBER says it is). Nevertheless, we were warned that the recovery would be slow and painful. In fact, Americans were told to brace for a “sluggish recovery,” a “jobless recovery” and perhaps even a “double dip recession.”
The most recent semantics have us discussing a “second stimulus” versus “targeted actions.” Regardless of what we call it, the proposed solution for our sluggish recovery seems to be more government spending. But is that really what we need? In 2009, individuals filed for bankruptcy because they lost their jobs, experienced a reduction in salary or were trying to save their homes; companies filed for bankruptcy because their sales were down (people simply are not spending money) and access to capital was limited. Notably, consumer and business bankruptcy filings surged by 32% in 2009, with approximately 1.44 million filings. More spending on infrastructure will not fix these problems. We need to focus less on semantics and more on substance; not an easy feat generally but perhaps even more difficult in a midterm election year.