It’s the economists, stupid

February 3, 2009

The United States in 2008 hardly resembles scenes from Cinderella Man, O Brother Where Art Thou and Road to Perdition, but you wouldn’t know this listening to the constant questions about an oncoming Great Depression from the media and politicians.

There will not be a 25 percent unemployment rate. There will not be mile-long bread lines filled with thousands of families who cannot support themselves. There will not be another dustbowl.

After the Great Depression, we learned many lessons on how to avoid another financial catastrophe. Thanks to FDR and the New Deal we now have the FDIC to insure banks up to $250,000, Social Security to ensure workers will be able to retire with dignity and many unemployment benefits protecting those who lose their jobs from being unable to support their families. 

In 1929, losing your job was almost a death sentence. Men were usually the sole breadwinners for their families. Many had to give up their children or beg for food to stay alive. Families packed what little they had into wagons and roamed the country in search of work. This is not the reality of 2008.

The current unemployment rate according to the U.S. Bureau of Labor and Statistics is 6.1, not 25 percent as it was during the early 1930s.

The U.S. economy has grown 3.3 percent in the last quarter, which is congruent with the average growth rate of 3.4 percent since the Great Depression. Overall, the median price of a new home is up 1.3 percent since December 2007, according to the U.S. Census Bureau.

Why would we be led to believe we are headed for another Great Depression, that we will soon see firsthand what conditions were like in 1929 when life was at its bleakest for the American economy?

It’s an election year.

Not to say this pandemonium is all hype, but the bad economy has done wonders for the Obama campaign. He currently has a nine point lead in a daily Gallup Poll.

Obama recently claimed the “percentage of homes in foreclosure and late mortgage payments is the highest since the Great Depression.”

Right now, 6.4 percent of mortgages are delinquent to some extent, and 2.75 percent are in foreclosure. During the Great Depression, the rate of default for homes was 50 percent, according to the Mortgage Bankers Association.

Comparisons of foreclosure and delinquency rates were not even tracked until 1979, according to the Washington Post. Obama’s statement simply is not true.

However, the statement this is the worst financial crisis since the Great Depression may be a fair one.

The important word here is “since.” 

The $700 billion bailout underscores the precarious situation of our economy. Credit between banks and companies virtually has come to a halt, stifling any kind of growth. 

One thing is for certain: the economy is not healthy. Many have lost their jobs, an estimated 760,000 in 2008, according to CNN.

People are feeling the strain of a sluggish economy, but to say this country is headed for another Great Depression is simply irresponsible and is the one thing that got us into this mess in the first place.


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