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.

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4 Responses

  1. A.J. Sutter says:

    By ‘semantics,’ I suppose you mean the style of the argument rather than the substance of it. But semantics actually refers to meaning — in which case perhaps more focus on semantics is needed. Apropos of that, this post is a bit of a rant, particularly against spending on infrastructure, without any concrete affirmative recommendation. What is your suggestion?

  2. Michelle Harner says:

    A.J.: Thank you for the comment. I actually did not intend for the post to be a rant; rather, I was just hoping to spark some dialogue and creative thinking about the issues. With respect to the term “semantics,” I was using it in the vein of phrasing and meaning. With respect to a solution, I really wish I had the answers. I don’t. But what I will say is that I think this recovery needs a different type of solution. In addition to spending on infrastructure, which I acknowledge can create jobs and enhance community value, I think we need to explore other alternatives. For example, we could try to create incentives for banks to lend directly to consumers and businesses on reasonable terms. (Banks have starting lending again, but primarily to hedge funds and private equity firms, which they believe are safer bets.) We also could do more to encourage outdated industries to modernize, but we would need the fortitude to let them close if they are not up to the task. We also could invest more in retraining people and working to bring new opportunities to their communities. Now, I recognize that it is much easier to propose ideas than it is to actually implement them. I would just like people to discuss the issues in real terms and not worry so much about labels and spin. Thanks again, Michelle.

  3. A.J. Sutter says:

    Thanks for your reply. It sounds as if your ideas for dealing with the surge of individual bankruptcies include (i) giving banks incentives, (ii) assisting companies, and (iii) retraining people instead of giving them jobs. On the other hand, infrastructure spending could act more directly, creating new orders for companies and new jobs for some people, especially in the less highly-skilled sectors; cf. the New Deal’s WPA. Maybe your objection to “more government spending” is itself a rhetorical trope (a/k/a ‘semantics’), and more ideological than practical?

  4. Michelle Harner says:

    A.J.: I understand your point on infrastructure spending and its role in the Great Depression; I do see the value it can add. But I think our economy is different than it was in the 1930s and, consequently, additional or different steps might be necessary. Also, with respect to infrastructure spending, my understanding is that much of the first stimulus has yet to be spent (it was not a front-loaded package), so why not allow those funds to work and focus on alternative strategies? I think unlocking capital; helping companies preserve and create jobs; and preparing our workforce for the future are reasonable and necessary steps in our recovery. Thanks for the dialogue, Michelle.