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Posted by: Michael Mandel on February 11
On Monday Justin Lahart wrote a nicely balanced piece in the WSJ on the possibility of a strong recovery. He wrote:
But just as economists were caught flat-footed by the sharpness of the downturn, history says they could be surprised by the speed and strength of the recovery — once the economy shows signs of turning around.
And he goes on to add
if the government’s coming stimulus package and bank plan are able to restore a modicum of confidence in the economy, recovery could come surprisingly quickly.
Of course, Lahart also lays out the reasons why a strong recovery might not happen anytime soon.
I’m on the fence about this one. On the one hand, this crisis feels to me like a structural downshift in consumer spending which is traumatizing the tangible sector of the economy.
On the other hand, it’s also true that the well of bad debt is limited. It’s worth noting that today’s Washington Post calculates that the federal government has “committed at least $7.8 trillion in loans, investments, and guarantees since the beginning of 2008.” That $7.8 trillion exceeds even the most depressed view of the debt losses in the economy. So it may be that the government has actually done enough already to cushion the downturn.
I’m still thinking.
One final note: The Columbia Journalism Review wrote a weird piece about the Lahart story. Ryan Chittum wrote:
The Journal is too contrarian for the sake of it in an Outlook column positing that the economy could be in for a sharp recovery….
Too contrarian? Is Chittum suggesting that this story should not have been written? Is he saying that only stories which fit the prevailing negative narrative are acceptable?
I don’t get it. By my lights, one of the main roles of economic journalism is to tell the stories that no one else is telling—good or bad. Lay out the arguments, and let the readers decide for themselves—which is what Lahart did.
Frankly, I think we need more economics stories that are contrarian, not fewer. That’s what we needed during the boom, and that’s what we need during the bust. End of story.
Michael Mandel, BW's award-winning chief economist, provides his unique perspective on the hot economic issues of the day. From globalization to the future of work to the ups and downs of the financial markets, Mandel-named 2006 economic journalist of the year by the World Leadership Forum-offers cutting edge analysis and commentary.