Is a Double Dip Recession Inevitable?

Maybe: Early last week, ECRI notified clients that the U.S. economy is indeed tipping into a new recession. And there’s nothing that policy makers can do to head it off.

mutually assured destruction

That's the term Nate Silver uses to describe the brinksmanship over whether to extend the debt ceiling.

Personal Debt, Credit, and the State of the Economy

A couple of New Republic articles try to get to the heart of the economy, why we are here we are, and what it takes to get out of it: It was a bubble driven recession, not a typical business cycle recession, and that makes everything worse. Household debt has almost tripled between the late 1990s and 2007. Now people are paying off that debt, which limits current spending and places a limit to any current expansion. Ironically, now that people are doing the right thing (pay off debt, not add to it) the economy continues to suffer.

- William Galston.
- Raghuram Rajan.

When is a Recovery Not Really a Recovery?

From the Economist: How to think about a jobless recovery

Property Tax Revenues Decease

As housing prices decrease, tax assessments decrease as well. More property owners are challenging their tax assessments and succeeding given the declining economy. But this raises questions about the ability of local governments to collect the revenue necessary to provide essential services like police and fire protection, road and sewer maintenance, trash collection and the other housekeeping activities local governments perform.

The tax appeals and reassessments present a new budget nightmare for governments. In a survey conducted by the National Association of Counties, 76 percent of large counties said that falling property tax revenue was significantly affecting their budgets, said Jacqueline Byers, the association’s research director.

Officials in some states say their property tax revenue is falling for the first time since World War II.

The recession has already taken a significant toll on states’ budgets, as rising joblessness, a weak business climate and a drop in consumer demand have cut sharply into receipts from taxes on sales, personal income and business earnings.

The pain at the state level is trickling down to county and local governments. To compensate, about 10 percent of large counties are raising the tax rates associated with home values to minimize the revenue loss, the county association said.

Two consequences seem to follow from this, neither good for the still declining economy. As cities cut costs they will cut workers -- or the hours they work, which contributes to the worsening unemployment rate and the accompanying drain on services that comes with it. And as tax rates increase, money that could circulate in the local economy will instead go to local government.

But the dilemma is that if services are cut, the infrastructure that allows the local economy to function efficiently will crumble, which also contributes to an increasingly declining economy. Recessions are not fun.

For informational purposes, this paragraph does a great job of outlining one of the difficulties the American federal system has in establishing a coordinated strategy for dealing with the problem. It is not a coordinated system to begin with:

Property taxes are meted out by a disparate patchwork of cities, towns, counties, and school and fire districts, all with their own rules. Because tax formulas vary widely county to county, not every decrease in assessed values automatically lowers a household’s property taxes.

Another World

As if a segment of society lives in a completely different world than the author of the post below, Foxnews tells us not only that the recession is a media myth designed to elect a Democrat in the White House, but that media stories are actually creating the depression.