The wait-and-see economics of President Bush have taken a heavy toll. The drop in November's employment sharply raises the odds that the recession isn't ending.
In a time of high debt the biggest dangers lie ahead. But the president persists.Yesterday, inching closer to the facts, he called the economy's performance "unacceptable" but offered no new proposals for growth. He plans to wait until January.
Don't blame the White House alone for not taking strong action. Until recently many traditional liberals favored sitting this one out, urging at most that the Federal Reserve work a little harder to stoke spending.
What can explain the complacency?
A poor memory, for one thing.
The Great Depression started off slowly, too. The year 1930 was worse than the year 1991, but it was not all that bad. In fact, in the spring of that year the economy looked as if it had stopped falling.
President Herbert Hoover repeatedly declared the recession over, and the advice of his best and brightest was unanimous: Sound money and balanced budgets were all that were needed to restore the world's economic health.
Only in mid-1931 did a recession at last turn into the Depression. The heavily indebted international financial system collapsed.
Today economists with short memories assert that lower inflation and interest rates will inevitably spur consumer buying and business investment and turn the economy around. But why haven't they yet?
In the '30s, low interest rates did not fuel spending. Prices dropped for years, but that did not help.
Modest gains in productivity recently have led to overconfident claims that we are on the brink of a new era of fast growth. But the '30s produced faster leaps in productivity as the work force was pared to the bone and those who had jobs worked all hours for fear of losing them.
Among the forgotten lessons is that layoffs often just led to more layoffs; a recession can feed on itself.
America today is racing against a clock not all that different from the one that struck in 1931. This time it is not a shaky international financial system so much as our own: The tidal wave of '80s debt has not been repaid and, even if we don't slide back into recession, slow growth will simply not lift all the boats.
We need a full-blooded recovery.
First, as insurance against a deepening recession, we should enact a one-time tax rebate aimed at lower-income workers who need it most and who will spend it all.
Second, business needs to be prodded to invest with specific investment tax credits, not cajoled through lower interest rates.
The financial markets are still fighting inflation and keeping rates too high. Myopic investors acted similarly in the '30s.
Third, and most important, large public investment programs should be adopted to rebuild the infrastructure, improve child care and enhance early education.
It is time to throw out the conventional wisdom of the '80s, poke our memories and remind ourselves that recessions often do not correct themselves.
(Jeff Madrick, business correspondent for NBC's "Sunday Today," is the author of several books on finance.)