It is once again the"Economy Stupid" and both parties better get that soon. In light of the Republican stupid responses (Cut taxes again for the rich and make the Bush taxes permanant) they clearly show they don't get it. The Democrats numbers are just as bad. We need alot more than ashort time $800 per person break to take care of the economic problems that will bring us down in the next year. Both the Obama solution and the Clinton solution are not enough to shake the problem when forclosures continue, mortgages become impossible to get and insurance companies that back debt can't pay off. This is the BUSH recession!
The Economy Sucks. But Is It ’92 Redux?
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Recessions—defined as a contraction in economic activity—are notoriously hard to predict, especially since they occur so infrequently. Since 1992 the economy has contracted for just eight months, according to the National Bureau of Economic Research, the Cambridge, Mass.-based arbiter of business cycles. Recessions usually occur after a the economy hits a huge speed bump. The commercial real-estate/savings-and-loan implosion precipitated the 1990 recession. In 2001 the bursting tech bubble caused a sharp pullback in business investment.
If the economy teeters into recession this year, it will be because the hardy American consumer—who accounts for 70 percent of economic activity—has finally hit the wall. And when consumers stop spending, the companies that cater to them idle and lay off, which, in turn, leads to more reduced spending.
"Consumers were cautious in their spending at Christmas, and they're going to be cautious going forward," said Rosalind Wells, chief economist at the National Retail Federation. As a result, retailers are acting swiftly to reduce costs and cut their losses. In recent weeks, Talbots announced it would shutter all its Talbots Mens and Talbots Kids clothing stores.
At the dank CompUSA store on Eighth Avenue and 57th Street in Manhattan, a lone security guard checks the bags of the handful of shoppers buying memory cards, cell phones and televisions for 15 to 30 percent off at the store's going-out-of-business sale. "As the days go by it's slowing down a bit," says assistant manager Steve Laureano, who plans to go back to school and seek work elsewhere. The outlet is one of 103 that the chain is closing.
As you've no doubt heard, the trouble started with housing. Defaults on subprime mortgage led to a credit squeeze. After enjoying several years of growth, home prices fell an unprecedented 6.1 percent in the past year. "There's never been a time where you had a real-estate deflation as deep and prolonged as this," says David Rosenberg of Merrill Lynch.
In the most recent recession, 2001, the areas hardest hit were those that had benefited most from the technology boom—San Francisco, Boston and Austin, Texas. Today, former housing hot spots like California are functioning as cement shoes for the national economy. John Harmer, co-owner of Southland Lumber & Supply of Inglewood, Calif., says his business is off 50 percent this year. After being hit by a slowdown in sales to home-remodeling contractors, his 18-employee firm, which also supplies materials to the sets of television shows like "Boston Legal" and "Nip/Tuck," was nailed by the entertainment writers' strike. "TV is out completely," Harmer says. So far, 10,500 Hollywood workers have been laid off since the strike began, says Jack Kyser, chief economist of the Los Angeles County Economic Development Corporation.
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