An odd thing is going on beneath the surface of the economic news. Several odd things, in fact. There is no question that all, or almost all, of the economic news is grim.
New claims for unemployment insurance soared above the half-million mark last week. The housing market shows no sign of recovery, and one government estimate is that the oversupply won’t be worked off for several years.
Consumers have holstered the plastic, driving retail sales down by record amounts. Once-mighty General Motors can only hope that Barack Obama takes the oath of office and pushes a rescue package through congress before it runs out of cash.
Share prices fluctuate wildly, but always seem to end up lower. The Obama team is leaking plans for tighter regulation of the financial services sector, more costly enforcement of environmental and health and safety regulation.
And the opposition to more intrusive and growth-stifling tax and regulatory policies has been weakened by the sweeping victories of the Democrats in the congressional races. There’s more — fill in the blanks with your own favorite bit of bad news.
We Americans, of course, never miss an opportunity for dark humor, what cynics might call whistling in the graveyard.
Business Week reports that New York City’s 20-somethings “are throwing Depression parties, where the clothes are ‘30s vintage and the playlists favour Big Band numbers and Dust Bowl ballads.”
Rentals of “The Grapes of Wrath” and sales of John Kenneth Galbraith’s 1955 best-seller, “The Great Depression” are on the rise.
But in my conversations with economists who have been worth listening to in the past, I detect some skepticism about the consensus that we are in a tunnel in which no light is discernible.
They sense unreasoned panic among consumers, related more to media fixation on share prices than to an appraisal of their own economic circumstances.
The overwhelming majority are paying their mortgages on time, and quietly but importantly benefiting from the collapse in oil and petrol prices.
They are adjusting by prowling the aisles of Wal-Mart rather than up-market retailers. That is not to say that there is no real suffering out there.
There is, especially among the unemployed. But this isn’t the 1930s, or even the early 1980s.
These mavericks do not share the view that we are in for a long, deep recession. They are predicting that the slide will abate by mid-2009, and a slow recovery begin later that year, or by early in 2010.
The second oddity is the beginning of a fight-back against the idea that there is no limit to what governments can and must spend to turn things around.
Talk of the dangerous impact of trillion-dollar deficits on the value of the dollar has begun to trickle down from conservative think tanks into the minds of some policymakers, resulting in a dawning awareness that somewhere a line must be drawn under new spending programs.
That is part of the reason — the other is the weak case made for relief by the chiefs of the auto companies. Congress failed to dish out the additional $25 billion that the once-Big Three domestic auto manufacturers claim they need to avoid bankruptcy.
Republicans held to the position that that the $700 billion earlier approved by Congress was designed to ease the credit crisis, rather than become a honey pot into which advocates for a variety of troubled industries can dip as they construct a new industrial policy.
In the end, the auto companies will get help: the president-elect has promised the United Auto Workers that he will not forget that their financial support and doorbell-ringers delivered the key state of Michigan to him earlier this month.
And the new Congress will concoct another stimulus package. Money will go to the states, hard-pressed by a downturn in tax receipts after they failed to store a bit of fat during the good times, for roads, bridges and schools — and a bit of fraudulent skimming.
The period of eligibility for unemployment insurance will be extended. There will be money to bail out some of the homeowners who are behind on their mortgages but might be able to remain in their homes given a bit of relief.
After that, the spigot will be turned off, or at lest tightened. Then, it will be wait and see — wait and see whether the optimists have it right, and a recovery peeps through the clouds sometime next year.
Examiner columnist Irwin Stelzer is a senior fellow and director of the Hudson Institute’s Center for Economic Studies.
