Just a few short months ago, few analysts would say publicly that the American economy was likely to slide into another grueling period of recession. That's changed.
August 9, 2011
The single bright spot in this anemic “recovery” had been steadily rising stock prices. Although the market staged a modest rally on Tuesday, news of the debt ceiling deal was followed by a massive sell-off in stocks – the S&P 500 saw its biggest one-day drop in more than a year the day the deal was announced. After losing $14 trillion in household wealth in the crash, Americans' nest eggs had rebounded to some degree, but whether their 401(K)s and investment accounts hold their value in the coming months remains to be seen.
The outlook for the economy is extraordinarily bleak. But we've pulled ourselves out of deep recessions before. What's different now is the profound, Tea-Party stained dysfunction plaguing our political class. As I wrote recently, if the economy does end up contracting in the near future, it will be a recession driven by the “age of austerity” embraced by Washington – and the contractionary policies it has ushered in.
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