Recession and recovery

Economists do not predict the future; they evaluate the past to describe the present. For that reason, the pronouncement this week by the National Bureau of Economic Research that the U.S. economy has been in recession since March is not cause for snickering about academics merely sticking a label on what’s long been obvious to everyone else. Using the R-word is serious business and it takes some time to be certain that the key business-cycle indicators – employment, industrial production, retail sales – all have gone from slowdown to actual contraction.

The word is not to be trifled with, neither is a remedy. Contrary to the assertions coming from the White House, the official designation of recession does not strengthen the case for the administration’s misguided trickle-down economic-stimulus bill and

it certainly does not create any urgency

of passage before Christmas. The administration’s latest tactic, asserting that Wall Street is expecting a stimulus bill and will react negatively if it doesn’t arrive, already has been refuted by several leading Wall Street analysts.

Even if one accepts the premise that the best way to boost the economy is through tax cuts to corporations and the wealthy, the benefits will not arrive nearly soon enough for an economy that, if it needs stimulation at all, needs it now. There have been 10 previous recessions since World War II. The average length has been 11 months, the two longest lasted 16. The current one is going on nine months and even the administration says it likely will be mild and short. The case for long-range stimulus simply is not made and there certainly is no need for pre-Christmas haste.

Recessions rarely are followed immediately by explosive growth. While slow, steady recovery is good overall, it does lead to prolonged suffering for some. The economic indicator that had the sharpest decline is employment; it also is the indicator most affected by the Sept. 11 terrorist attacks. The unemployed are the most hurt by this recession and deserve the most help. Expanded unemployment benefits, including assistance in maintaining health insurance, should be the immediate focus.

Another immediate concern should be increasing consumer spending to replace lost retail jobs and, eventually, lost manufacturing jobs. A proposal, co-sponsored by Sen. Olympia Snowe, to suspend sales taxes for several weeks during the holiday season would have increased buying power and boosted consumer confidence at a critical time, but Congress failed to act on it. The idea will be nearly as good after the holiday season – perhaps even better, if it prevents a post-holiday slump, and a new proposal for a one-month suspension of Social Security payroll taxes, a break for both worker and employer, also has merit.

But beyond immediate action with well-defined purposes, Congress must consider the states and the damage that ill-advised federal action would do. The recession has hit sales-tax reliant states hard – Maine’s potential $200-million biennial shortfall is a trifle compared to the billion-plus deficits many states are expecting. This would be the perfect time for Congress to make good on its many unkept promises, such as funding its years-old special education mandate or its newer health-insurance portability requirement. Further, the tax cuts in the plans put forth by both the administration and the House would lead directly to state revenue losses of as much as $5 billion.

In addition to recession, every level of government has experienced enormous unanticipated expenses related to increased homeland security. The price tag just for municipal governments that manage airports, shipping terminals and other transportation centers is estimated at more than $11 billion – enhanced security added $20,000 to the cost of bringing a liquefied natural gas tanker into Boston Harbor last month, and 42 more tankers are on the way.

The panel of experts that called this recession nine months after most Americans felt it will, someday, call a recovery long after most have noticed improvement. What the White House and Congress do during the next few weeks will determine how soon and how much improved.