The truth hurts. But this is what we need to hear. Thank you, and keep your head low

If we get a decent health care bill that will go a long way toward closing one gaping hole in the social safety net and it will increase economic security.

The "symbolic analyst", manufacturing-less, outsourcing economy wasn't such a good idea after all, now wasn't it?

What will the new economy look like?

A green energy and living overhaul - an industrial and manufacturing base to supply it all. Wealth based on work, money based on a product...not based on financial magic tricks. It means slower growth, but stronger growth.

And a Space Economy. No, not space tourism. Exploration, new resources, and new technologies. The Space Economy is what we need to strive to reach. That's the "next" step. The green gets us there, since the Space Economy is still a ways away.

That's where we HAVE to go if we want to prosper in the long run. Will we? I don't know, but I hope so. As for the current recovery...I agree with you (and most other realists). Everything was overpriced, and we're seeing a correction, not a recession.

My guess? A capital "L" shaped recovery...with a slight raise in the leg. Things will grow, but hopefully in slower and more stable way. The issue with "V" and "U" is they get us right back where we were...ready to fall.

I am one of the few that didn't think Obama had superhuman powers that would enable him to affect the economy one way or another.

I am just relieved that we have someone marginally interested in all facets of our economy instead of pushing a singular agenda to benefit a few.

I wanted intelligent representation in the White House, even an Obama failure is better than the trajectory we were on.

(P.S. big fan here Mr. Reich)

When things get really bad, I'm afraid we'll just have to start eating the rich.

Historically, this was the ultimate judgment required to be made by FDR. Is a democratic system of government and society viable when economic activity and unemployment reached the depths experienced in the early days of his administration. The Republicans were willing to accept things as they were, refusing to countenance government involvement in the economy. FDR made the judgment that maintaining the status quo was unacceptable which began his new deal programs which didn't reach full employment until WW2 and the post war boom.

Although Obama has recognized the need for government action, and spurred it, he has been satisfied with letting the centrist Democrats water down the necessary action, even in the face of responsible economic opinions (see, Krugman) that the stimulus investment is far to skimpy to fill the hole in the economy.

What economic model is based, not on confident consumers, but frugal ones who have just had the bejesus scared out of them by falling home values, diminished retirement accounts, health care increases as far as the eye can see (without a likelihood that Congress will be able to craft anything workable in this latest healthcare legislative effort), little job security, and what remaining income exists being bled off by bank credit card scams which will put a vast majority of "middle class" consumers in hock to this loan sharking activity for years to come.

This is a generational thing. It is not a short term correction. Our grandchildren will be hearing our stories of survival from economic greed and chains forged from credit card debt owed to the bank that will take years to be free from. This is not the word of mouth that builds a society of confident consumers, either in this generation or the next.

I think Mr Reich is correct; there is no knowing what will be the shape of the economy resulting from this depression. One major question is whether Obama and the Democrats running the government will simply leave the resolution of this to chance, letting the chips fall where they may (here I mean the very real prospect of civil unrest from desperate, once middle class families), or whether they will find that risk too great and intervene heavily to force the creation of an economy designed to address personal needs and preserve our historical democracy and societal forms and values.

President Obama's time has arrived to make a judgment on the eternal question that FDR was forced to confront.

There's gloom unless we invent our way out of this. Will we do that? Most likely. On what timeline? Nobody knows. But there are brilliant people working on brilliant possibilities, even in the failed state of California, from where Prof. Reich sees his partial view.

The crucial thing is getting the old industries out of the way. We've done well with autos. What's next to deconstruct? The news business is also well into deconstruction. So is the music business. All this is very positive.

Finally some integrity around here.

And I appreciate your questioning of what a recovery will look like.
Because anyone that says they do can immediately be dismissed as a fraud.

Theres no doubt Obama failed to protect homeowners from losing their homes while caving in to the banks and making this depression much worse.

And while one must be very cautious with polling it appears the support for Obama is fading as people see things are getting much worse in their lives while the rich thrive with wall street bailouts.

Nothing good will come of this and with no jobs and no recovery its hard to see any politician will ever gain the trust of the people .

Maybe that will be one good thing to come of all this.

Obama had a chance to be great by pushing programs with the dem congress that could have taking back the country from what bush destroyed.

His support would have crushed his critics and left them on the sidelines for generations.

Instead he chose more war , the most massive exchange of wealth in history and a continuation of most of the bush policies starting with telecoms immunity all the way to stacking key positions with wall street and corporate hacks.

I was an early critic and now more are waking up.

Take your best shots people as I expect the usual suspects but pretending wont change the fact that Obama will never regain the support he enjoys now after he losses it.

THank you Prof. Reich for pointing out the obvious which is that our economy is not going to "recover" because that would mean it wasn't dead, but the fact is the old economy is dead. We are in the midst of total economic collapse, not a recession or a "downturn". Our political and business leaders ran our economy aground and it is not simply a matter of patching her up and getting her back out to sea. The boat no longer floats! We need a new boat entirely and not one just like the old one because the old one kept our people either out and out suffering economically the past 30-40 years or very close to suffering. We need, in short, a new deal for the American people and without it there will not only be no recovery, but there will be no hope of one either.

Reich hits it here:

[Recovery] "depends on consumers who, after all, are 70 percent of the U.S. economy. And this time consumers got really whacked. Until consumers start spending again, you can forget any recovery..."

And misses it in the title - never is a long time.

The savings rate has jumped from negative to 7%, and is probably going to rise higher. But most people put away 3-6 months worth of salary before they go on with prior spending habits. These are the 85% who have jobs.

As for those who don't yet, this isn't a total economic collapse. What's happening is several key sectors that were substantially over sized did collapse (finance, auto, home building). The people who lost jobs in these sectors (including me) can't simply rearrange resumes and jump into growing sectors like health care and energy. Plus, if you can't sell your house, it's much harder to move where the jobs are.

There's a lag with these two key factors. And as Reich implies, there is a process at work. Collectively, we all need to decide what is truly important (such as real health care rather than "insurance" for something we will all eventually need, or renewable energy) and then gear up for it. In the short term it's looking like an L shape - and it won't rise again until this new economy gets legs.

Here's the part that I find the most troubling and will truly delay progress: food.

The fat food companies are doing rather well right now. And organics? When you can get three burgers for $1.99 and a half pound of organic carrots for the same price, which do you suppose wins? Short term satisfaction or long term health? And which companies prosper?

Then again, hopefully every one of us in the 15% has planted a garden this summer. I sure did.

90% of the American labor force is working. As long as we don’t punish them with crushing protectionism, they’ll be fine.

However, the consumer will not be an important feature of the eventual recovery. Household savings is increasing at a pace never before seen, from zero to 5% in half a year. Unprecedented.

That alone is why this is going to be a long and deep depression. (Forget “recession;” that term was made up in the 1950s to differentiate the many slumps in that decade from the 1930s.)

Labor data are always lagging indicators. Anyone shouting about unemployment today is simply out of touch with real economics. Hiring starts only after the recovery is already several months old, and we’re still contracting in Q-3.

i never really studied economics so i don't have much of a basis to say anything about the old, let alone the new economy, but when the federal government started bailing out the obviously irresponsible and insolvent banks, it seemed like not only had they utterly lost any semblance of a shred of belief in the health and integrity of the US economy but that they had lost all sense of proportion, engaging in such ludicrously irresponsible borrowing/spending.

i mean, what is the interest on $15 trillion dollars?

These Chicken Little prognostications are as old as dust. Every recession brings them out. Truth be told, the depth of the current recession is not much different from what we had in the early 80's. Unemployment exceeded 10% then, too, but we had a far less friendly administration in the White House - one who was openly hostile to workers. This is not the case today.

NO ONE knows what is going to happen. No one. Comparing to past recessions is futile because every one is different and you can find a historic parallel to almost anything you want to argue. But here's a few things that are unarguably true:

1. The population will be higher next year than it is now. And the next year, and the next. Those people will need someplace to live. However bad the current housing situation is, population growth will sop up the excess capacity and prices will rise again. They will also need all sorts of other goods. Population growth is our friend and is what mainly differentiates us from the "lost decade" of the Japanese recession. They had no population growth to spur demand.

2. People will start buying again. Cars will wear out. Kids will continue to outgrow their clothes. Inventories have been steadily dropping, so sooner or later businesses will have to employ people to produce goods.

3. Banks will start lending again. They have to. That's what they do. They can't just sit on the money - shareholders demand a return on their investment. Lending is profitable.

4. Recent recoveries have been "jobless" mainly because of tremendous gains in productivity. But there's a limit to how much productivity you can wring out, and it's unlikely that such productivity gains can be duplicated this time around. Certainly not without a lot of investment, which requires...wait for it...lending.

Since the Great Depression, no recession has lasted longer than 16 months, and most have been less than a year. Prof. Reich says the economy will change, but it's been changing since the Pilgrims landed on Plymouth Rock. It will continue to change.

Here we go with the "new economy" again. Remember NAFTA, Bob? When the manufacturing jobs left there would be a better, more edcuated work force?

Guess you didn't figure on India taking the IT jobs, did ya Bob? Didn't figure on the maquiladoras, did ya Bob?

Pardon me if I don't trust your prescience this time around.

Great column and you didn't even factor in the subtleties of what runs our economy (cheap energy).

As an interesting example showing collapse and how it's related to energy production, Orlov has a nice column here:

http://cluborlov.blogspot.com/2009/06/slope-of-dysfunction.html

My thoughts ran more to "when the economy starts to pick up, you'll know, because oil prices will skyrocket and down it'll go again" - not unlike a past-his-prime fighter named Kid Capitalism getting his comeuppance.
So see?
We're on the same wavelength here.
That Marx kid saw the old guys punches before he'd even thrown them...

very comforting. i feel a lot better now.

Aside from the issue of "RE-covery" in the sense of returning to where we once were -- which is a little bit glib, as it is the return of GDP growth, relatively full employment, and a few other key measures that constitutes 'recovery' economic transformation or no. The idea of an economic crisis being accompanied by an economic transformation ('takeoff depression') is not new.

What is also not new, but apparently still a problem w/our economic assumptions, is the idea that the economy has its own cycles, that, as one then fellow student I knew who said McGovern was "the worst thing to come down the pike since Franklin D Roosevelt" 'the economy is like a rocking chair, rocking itself back into a slump and then back again'. Well, as Reich knows, it isn't. The "shape" of the Great Depression in particular was determined by non-economic events -- the New Deal, the attempt at budget-balancing in 36-7, WWII. This crisis, like the 30s and, for that matter, the boom of the 90s, is being and will be decisively shaped by politics.

As for the new kind of economy that SHOULD emerge from the crisis, although not necessarily will, I would call it 'eco-industrialization' -- the next phase of industrialization. The transformation of energy is central, but not the whole. And the nature, timing and shape of that transformation, will be determined, or even created, by public policy -- if it occurs (rather than a world as described by poet Dennis Brutus "There will be ample provision, for the elite, and their servants, and their poodles ..." as they hurtle off into space, leaving the rest of us on what remains of earth, stumbling around in "an uninhabitable fug".)

Eco-industrialization requires vigorous government policy at its center, and so far Obama has indeed, all his 'ambitious' agenda aside, a very tepidly-willed president when it comes to progressive politics. I would note that although Clinton presided over a period of so far unequalled prosperity, and a period of demilitarization and (relative) peace for the US for eight years, he was indeed hostile to authentic progressive politics and to those who would make it come into being. Obama so far looks more and more like Clinton-lite, which is very disappointing; but if progressives DEFY 'getting with the program' (something -- given the cowardice, or rather the misplaced 'bravery' to do what is the socially acceptable thing of authentic progressives in the US generally, and the massive invasion/occupation of privileged creeps of what would otherwise be a the cultural space of a progressive movement -- that seems all but impossible) then the Obama presidency could be turned around to be more like Roosevelt than like Clinton.

The kinds of things that are needed -- progressives seizing upon and recognizing the centrality of Jim Hansen's urgent predictions, rather than leaving him as a splendidly singular voice, like John Gofman was in his field, permitted as the 'exception that proves the rule' as a syndrome, progressive economists, as I've urged, getting together to formulate an alternative economic platform, including short term urging of a second stimulus and what would be in it, etc. -- these do not seem to be being done and indeed are simply 'not part of the program'. So doing what's necessary (as always, but especially in the 'fierce urgency of now') is precisely what is unlikely. It implies a vigorous collective going upstream on the part of progressives who are culturally habituated, "ideologically toilet trained" as I call it, to 'go with the flow' to do what they simply will not do and to be that which they are not. But courageous authentic progressive politics and courageous authentic progressives, in significant numbers and working together, unlikely as it appears, is the only really acceptable way out.

I recall reading an article by Mr. Reich in the 1990s in which he said that a job will be the status symbol of the 1990s. It was only through the advent of the interwebs that his prediction was put off, but now it seems he will be proved correct 20 years later ...

Someone check the temperature in hell - I agree with Reich. What we are really seeing is a "reset" of the US economy and no amount of stimulus - other than direct payments to consumers will improve the current situation. The proof is any weekend (night) at restaurants - they are full, but the electronics stores and car dealers sit empty. Consumers will reward themselves with nice dinners and family outings, but consider new TV's and cars a luxury. So forget stimulus......this poor economy will improve once "you and I" decide it is time for it to improve.

Pure Garbage.

The economy would be recovering a LOT faster IF Obama, Pelosi, Reid, Soros stopped killing it.

A general tax on people (so-called 'energy' or 'carbon' taxes) will KILL the recovery...

A new Cost injected into people's lives for healthcare will KILL the recovery...

Hyperinflation caused by unlimited Pork spending for John Murtha's airport, Pelosi's rats, etc. (Bills signed by the chosen One... another broken promise).. will KILL the recovery.

THESE are the things killing our economy, not some creative wishful thinking problems hatched up by Mr. Reich.

No not 'W' shaped. Lets face it this recovery is much more likely to be 'O' shaped, much like that sucking thing in the bottom of the toilet bowl.

oops. typo. last line: along should be alone.

I want to be a part of the new economy! Let's build ultralight clean diesel and electric cars!

If the government was going to print the money anyway they should have given direct payments to the homeowners, either as direct infusion of capital or forced interest rate reductions.
Forced interest rate reductions would have lowered the amount due, putting more money in the hand of consumers.

Instead Obama wanted a system whereby the bankers would get bailed out FIRST. Why is Obama's plan all about creating jobs? The blue collar worker must be gainfully employed, in order for the government to get paid back the money it gave away to the white collar worker? The people need to be taxed so the banks would remain solvent?

Banks solvent, workers taxed.

Obama would assure no lazy good for nothing worker would receive benefits from this Government. Obama would create jobs, better that the government stimulate the economy than having consumer demand stimulate the economy. Besides it appears Obama’s trust in a few good contractors, is better than allowing all the people to meet they’re daily needs, such as shelter and bread. SHORTSIGHTEDNESS.
But before you get your panties ruffled, Wait the stimulus is coming, the stimulus is coming, OOPS “The economy is worst than we thought, we didn’t have all the information.”
Boy, what a relief Obama and associates now have more information. Sorry some of our friends and neighbors will never recover, too late for them. Now, more of the chickens are coming home to roost, people are losing their homes, further exacerbating the people’s lack of consumer confidence.

Hey sucker! Forget about your heavy debt burden to the lenders; buy a car. Make payments. Don’t YOU worry about the lenders; we’ll take care of them. They sure took care of them all right. You though middle class citizen get kicked to the curb.

Secondly, If OUR taxpayer money was going to pay the Banks, who in turn felt they were entitled to bonuses. But heaven forbid if the homeowners should receive an entitlement. If the homeowners could have paid off they’re debt to the lenders, NO defaults, No problems. Credit defaults, whats that?

Had ALL the homeowners; even ownership of multiple homes, been given access to refinancing, there may have been fewer defaults, property values wouldn't have dropped so precipitously and more money from an investor class would have been in circulation.
Instead the Obama gives the money to the Banks who in turn hoard the infusion, choking off the economy. Under Obama’s leadership I would be afraid to invest any discretionary money too, for fear I’d be the next VICTIM, to be accused of being speculative. Having seen the results so far.

Then the Obama administration ALLOWS banks to pay back it's debts on very generous terms, and allows the banks to raise fees and interest rates, so that the poor banker class can pay back the government loan.

Why is it the rich banker class, gets such generous terms, yet the people, especially the middle class are told, “You're not worthy, You can eat from the crumbs that fall from the table, and when your through feeding, could you pick up the tab?”

Could this administration be so blindsided by the results to date, or is it the administrations TRUE intent, to sacrifice this generation’s middle class, in hopes that future generations will not be so unfortunate. Is this the sacrifice Obama and Biden were speaking of?
Besides, wouldn’t a depression lower peoples COLA adjustments, forcing the American blue collar workers expectations of a better life, down to a globalization reality, Cheaper labor costs will help the next generational investor class. That is if you can survive.

I guess the course is set, nothing more to do, but suffer. The material things I thought would protect me in retiremnet age, have vanished. Who stole them? Are they in jail?
YES WE CAN doesn't inspire me. Yes we can suffer? Yes we can lose our homes? Yes we can see our hard work was in vain?
Yes we can see your plan SUCKS.

The economy as is can't get back on track? Thanks for telling us. Weren't you telling us just a few months ago we have to stabilize homes prices and get banks lending, and people borrowing and spending to prop up the economy. Now you tell us that won't happen... unbeleiveable.

So is this the new meme to cover the failure of the Democratic Party's socialistic agenda since 'It's Bush's fault' has expired? Tell you what: keep extolling the virtues of lowered expectations. Go on explaining to the American people the cultural richness of a life lived in poverty and want, with rationed medical care and skyrocketing fuel and food costs, the liberating joy of a reduced carbon footprint. It'll work for you, really. Trust me on this.

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