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Wake up! The US is in a recession

By Alan Caruba
web posted August 13, 2001

The US is in a recession. The mainstream media remains reluctant to headline the "R" word. They are all suffering significant advertising losses, so it is hardly in their interest to tell you the bad news. Lawrence Kudlow, a noted economist and syndicated columnist, however, has told the truth, reporting that, "Virtually unnoticed by the media, the latest government economic report on the nation's gross domestic product for the April-June quarter revealed that the heart of the US economy has slipped into recession."

If it were not for $22 billion in federal, state and local government spending, the real figures for gross domestic purchases (which excludes trade and government) "actually declined by 0.2 percent annually. In other words, the productive sector of the US economy has been sinking for six months, actually falling $6 billion from $8.112 trillion in last year's fourth quarter to $8.106 trillion in this year's second quarter. It's a recession."

This is why not a day goes by without reading about companies that are slashing jobs and inventories. The news is beginning to seep out, as usual, in bits and pieces. Reuters reported on August 6th that US job cut announcements jumped an astounding 65 per cent in July. The industries affected were telecommunications, computer, electronic, and industrial companies. Fully 205,975 found themselves out of work in July, more than three times the level of job cuts in the same month a year earlier.

What kind of society is it when government is the largest spender? It's a socialist one. Capitalism is about private enterprise and initiative. It is government at all levels that has created the conditions to destroy economic growth and you can point directly to the one third of all federal laws and regulations devoted to the "protecting the environment" as a major cause of the decline.

You can point to the restrictions on the exploration and extraction of every form of energy source available in this nation. You can point to the restrictions on rancher's ability to graze their livestock where they have for more than a century. You can point to huge checks sent to farmers for not growing crops. You can point to the endless calls for an increase in the "minimum wage" whose burden falls hardest on small businesses.

Kudlow noted that "Private sector real Gross Domestic Product (adjusted for inflation, excluding government pump-priming) accounts for 83 percent of total economic output. All of the nation's industrial production and business investment comes from the private sector. And 85 percent of the country's 132 million jobs are created privately."

We have seen the nation's Internet and "tech" industries suffer massive losses, driving down the value of their stocks, forcing hundreds of thousands of workers out of jobs. That's eight percent of the nation's economy and it is in free-fall. Our manufacturing base has been shrinking for years. Ask an unemployed steelworker. Ask anyone formerly employed in the timber industry.

Want to start a new business? Forget about it. The Federal Reserve has forced more than half of the nation's banks to tighten their business loan standards. As Kudlow notes, "the venture capital flow, the real money supply for the wired economy, has dropped more than 60 percent during the past year. Without a sufficient supply of risk capital and bank credit, entrepreneurship and innovation is left dead in the water."

Bear in mind, it is technology breakthroughs that have been the driving force behind the boom of the 1990's. They create jobs. Now the only thing you read is how Lucent Technologies has just laid off another 20,000 people.

Americans are so ignorant of how the system works, they still haven't figured out that more government spending requires more government taxation. They're so involved with their own dwindling capacity to purchase anything they have ignored the spending spree that Congress has been on for years. It's obscene.

The most recent GDP figures show that the nation is in a private economy recession and a government economy prosperity. Having reduced personal tax rates, the President must also induce Congress to reduce investment and business taxes as well. The nation's governors must follow suit as well.

Without these measures, the recession will worsen.

We're in a recession. We are there because profligate government spending, combined with a steady stream of regulations, choking every aspect of our economy, has put us there. Your congressman is home this month. Call him. Write him. Fax him. Demand that spending be reduced, that further regulation be ended and existing regulations be rescinded. The "R" word is bad enough. The "D" word would open the doors to a socialist takeover. ESR

Alan Caruba writes the weekly column, "Warning Signs", posted on the website of The National Anxiety Center. © Alan Caruba, 2001

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