Depression

Some very smart people are starting to get very worried about the fundamental health of our economy.

Atrios doesn't want to sound apocalyptic, but...

[I] really am seriously worried about the economy going forward. Aside from the lost wealth in housing and elsewhere, we have lots of lost jobs, and it's hard to see a lot of those jobs coming back any time soon. The construction industry is going to be dead for awhile for obvious reasons. A lot of bubble jobs in the mortgage industry aren't coming back any time soon. Not quite sure what's going on with the auto industry, long term.

The worry is that there isn't just some weak demand in certain sectors which a bit of adjustment will sort out eventually, but that instead there's a structural shift which will require a much longer transition period before things get better. I'm worried, anyway.

And Robert Reich flat out calls it a depression.

Every lost job has a multiplier effect throughout the economy. For every person who no longer has a job and can't find another, or is trying to enter the job market and can't find one, there are at least three job holders who become more anxious that they may lose their job. Almost every American right now is within two degrees of separation of someone who is out of work. This broader anxiety expresses itself as less willingness to spend money on anything other than necessities. And this reluctance to spend further contracts the economy, leading to more job losses.

Capital markets may or may not unfreeze under the combined heat of the Treasury and the Fed, but what happens to Wall Street is becoming less and less relevant to Main Street. Anxious Americans will not borrow even if credit is available to them. And ever fewer Americans are good credit risks anyway.

All this means that the real economy will need a larger stimulus than the $787 billion already enacted. To be sure, only a small fraction of the $787 billion has been turned into new jobs so far. The money is still moving out the door. But today's bleak jobs report shows that the economy is so far below its productive capacity that much more money will be needed.

This is still not the Great Depression of the 1930s, but it is a Depression. And the only way out is government spending on a very large scale. We should stop worrying about Wall Street. Worry about American workers. Use money to build up Main Street, and the future capacities of our workforce.

The Democrats have to stop playing games with the Republicans. They have to stop buying into the GOP narrative about the deficit. We cannot afford to worry about the deficit right now. The government has to spend more money to put people back to work.

Reich says excess manufacturing capacity, such as idled automobile plants, should be utilized to build mass-transit vehicles, wind turbines, and electric cars. He thinks the government should start hiring people to do the hands-on work of making homes more energy efficient.

Obviously, the Republicans will shriek "socialism" at the first mention of such a plan. They should be ignored. The White House and its congressional allies should steamroll them to put a new Works Progress Administration in place. The government should literally start hiring hundreds of thousands of people to do work that needs to be done on our country's infrastructure. It will put money into people's pockets, revitalize the retail sector of the economy, and begin to reverse decades of neglect of public resources.