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Politics : View from the Center and Left
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To: Cogito who wrote (129354)1/26/2010 10:42:15 PM
From: slacker711  Read Replies (2) of 541957
 
The problem in economic contractions is that when companies start laying off workers, demand for products and services weakens, leading to further layoffs. When whole companies give up the ghost, this disruption is intensified, as more and more people find themselves without jobs. It becomes a vicious cycle.

So there are no strong companies around rehiring the laid off workers. The companies that are left standing go into a defensive posture and freeze or reduce hiring, since they are seeing reduced demand.

That puts a big hole in the "let the chips fall where they may" argument.

Your comments make it sound like the only way out of a recession is government spending. As Reich noted today, it wasnt government spending that got us out of the recession in '93 (the so called "jobless" expansion).

There are vicious circles in economics, such as bank runs....that is exactly where government needs to step up to stop the feedback loop. I see little evidence that this is the case today. No, we arent yet adding jobs, but no realistic economist thought we would be at this point in the recession. It takes time to wring out the excesses and to lay the foundations for the next generation of leadership among American corporations.

I'm not saying that the government shouldnt take steps to ameliorate the pain, but I am reading way too many articles/comments that seem to imply the only way out of a recession is government spending. That is absurd.

Slacker
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