True to this site's slogan, I've stayed optimistic on the economy over the last six months. Well, I've stayed mostly optimistic. But I am starting to worry.
My concern hasn't come from listening to the financial wise men—whether it's the guardedly positive comments of Bernanke and Romney or the more pessimistic cautions of Warren Buffet. There's something else sitting out there, something a little less easy to define, that has me thinking about what my new friend Fred Kleisner, head of the Morgan Hotels, called the "W Recession." No, not that W. I'm talking about the economy dropping precipitously, beginning to recover, then dropping again before ultimately climbing—down-up-down-up, like the shape of a "W."
Maybe it is the teachers that I know who are being let go. Maybe it is the failure to stem foreclosures and watching many of my own family members and friends struggle to make ends meet and stave off bankruptcy. Maybe it is all of the ambitious 20-somethings I know who are sitting home unemployed this summer. I'm not sure. But I am not as bullish as I was a few months ago—the stock market has not persuaded me.
This feeling has been brewing for a few weeks, but it came clear through right after I landed in Los Angeles last weekend for a quick trip. A woman at the Hertz car rental place at LAX said something interesting as we chatted. The business had been starting to pick up this spring, she said. Then swine flu hit, and people began pulling back. Perhaps that moderate pandemic made this fragile economy stumble—a hiccup that in bullish times would be easily missed, but is magnified when things are tough.
During my time in L.A. (I was supposed to attend the BET Awards, but did not—long story), I saw another side of our economy, the one that rewards creativity. On Saturday I got my haircut by a barber named Kelley. A former football player at UNLV, Kelley doesn't just cut hair—he also runs a chiropractor business with his family. An unusual combination, but unusual combinations are going to be part of our survival story. From individuals to families, companies to the government, we're going to need creative solutions in order to get through this.
And perhaps that's where this uneasy feeling about the "W Recession" stems from. In the upper echelons of American society—on Wall Street, where banks are eagerly paying back TARP so they can get back to paying out big bonuses, and in D.C., where the Fed is angling for even more control—you can feel a desire to return to where we were a few years ago. But if we waste this moment, when we have the necessary ingredients for meaningful reform, and instead simply play by the rules of the past, we're headed for another dip.
Of course, not everyone things we should turn back the clock, or that we're close to out of this thing yet. David Axelrod, the President's chief adviser, admitted this weekend that another major stimulus package may be needed. Paul Krugman, the Nobel-winning economist and The New York Times columnist has been warning that could happen for months—and that worse yet a weary and over leveraged public and Congress might reject it. Krugman wrote back in March that Obama's stimulus plan was not bold enough or targeted enough, and that its shortcomings could come back to haunt us all. I hope he is wrong.
Otherwise, the second half of the "W" could be quite drawn out.
Photo by jetheriot
The Stimulist is journalist Carlos Watson's original take on the daily news: a tasty mix of rising stars, provocative ideas, and inspiring stories. Enjoy responsively: