by Clifford F. ThiesLast year, the Obama administration was claiming credit for “slowing down the rate of job loss.” This year, it is striving for “a soft landing.” This is not a good metaphor. It creates the image of an economy whose descent has reached terminal velocity, like a skydiver whose parachute has failed, who – upon reaching terminal velocity – attempts to survive impact by achieving a soft landing.
In other metaphors that were attempted last year, we were looking for a “V”-shaped recovery as opposed to a “U”-shaped one. In a “V”-shaped recovery, the economy falls hard, and then recovers sharply. The last time we had a “V”-shaped recovery was when Ronald Reagan was President. That recovery resulted in Reagan’s landside re-election in 1984. In a “U”-shaped recovery, the economy lingers in recession for a while before beginning to recover. But, in 2009, we got neither a “V”-shaped nor a “U”-shaped recovery. Instead, we got an “L”-shaped economy. Now, with softening demand and the risk of inflation, we face the prospect of a “W”-shaped economy, sometimes characterized as a “double-dip” recession.
Also in 2009, Congress passed the trillion dollar “stimulus package” requested by the administration. This was one of a series of trillion dollar deals, including bail-outs for government agencies and private-sector financial institutions, for those behind on their mortgages and their student loans, cash for clunkers, leave no public school teacher behind, the umpteenth extension of unemployment benefits, etc., etc. These trillion dollar deals were supposed to prevent the unemployment rate from reaching 8 percent (oh my!). And, instead of the unemployment rate reaching 8 percent (oh my!), it reached 10 percent.
The “stimulus package,” I suppose, was not supposed to work like Viagra: you know, relatively quickly. Instead, it’s supposed to work like Cialis: “when the moment is right.”
Thus, the search for the right metaphor continues. Richard Nixon dealt with “inflation psychology.” Gerald Ford with “stagflation.” Jimmy Carter, “malaise.” What metaphor will characterize the economic woes of the current administration? How about the “Giant Slalom Economy,” where the economy weaves back and forth while on a downhill slide? Or, the “Chinese Water Torture Economy,” where the steady trickle of bad news turns everybody so fatalistically pessimistic that nobody is willing to invest in a new or expanding business? Or, the “Down is Up Economy,” where, after a while, double-digit unemployment becomes normal. With a “Down is Up Economy,” President Obama could be viewed as a Great President, like Franklin D. Roosevelt who demonstrated leadership during an eight-year period, from 1933 to 1941, when the unemployment rate continued above 10 percent.
If a “Down is Up Economy” seems far-fetched, simply recall the “Up is Down Economy” of 2006. Back then, the Democrats were calling an economy with only 5 percent unemployment and with no inflation, “the worst economy since the Great Depression.” That year, the Democrats took over the Congress and two years later the White House as well.
Dr. Thies is the Eldon R. Lindsay Chair of Free Enterprise & Professor of Economics and Finance, Shenandoah University, Virginia
