Bubbles in the Water

Like a diver overcome by nervousness and one too many caffeine free cappucinos the night before the big meet, the economy went off of the diving board and flopped onto its belly. An unpredictable splash swamped some of the shallow end of the pool, the safe place for careful money where some investors just recently went back in the water. It could have been worse. The economy could have taken a nose dive that ended in a concussion at the bottom, and lots of blood in the water.

Many will suffer no consequences from a lapse back into recession. The headlines mean nothing to those whose investments are varied enough that their tactical losses are buoyed by long term gains. Some very savvy business minded people will see this news and get on their marks to invest at low prices. Then there are the average working Americans whose livelihoods are indirectly and negatively impacted by troubled economic news. When companies lose money cuts can be expected, cuts to the workforce, to the salaries of those who keep their jobs, to benefits, and anything else that will keep stockholders on board by saving the bottom line.

There are still reasons to look on the bright side. The bad news could have come before this year's spring commencements, when new college graduates expand the workforce. Those who got jobs before the new downswing are very lucky. New hires are safer than long term employees. Keeping them and sacrificing older workers makes good financial sense for many companies. Younger workers are cheaper, and often less informed and willing to work for less.

Bad economic news is good news for the opposition party in Washington. The current administration will not have the luxury of going into the election year riding a tide of optimism and glowing success stories. Republicans will see a lot of gains, and Democrats will have a bitter struggle to hold on. The way this works politically, at least on paper, may as well have been choreographed in advanced.

Progressive economists and political analysts, almost across the board, saw this coming since before Bush ever left office. The bailout, even with all of the zeros that were involved, really wasn't big enough to effect the sort of change that needed to take place. Matthew Yglesias and Paul Krugman, specifically, alluded to the financial quicksand Japan found itself in during the later part of the twentieth century. The Japanese economy faced one bubble and burst after another because the government response to the initial problem, as massive as it was, simply wasn't enough to stabilize the overall downward trend. Their problems went on for fifty years. As many were saying during the TARP fiasco, we could either get it right the first time or play a game of chopping off hydra heads for a very long time.

This news of recession has a great big silver lining, for a lot of people. Some of the races in the coming election year that looked relatively safe for the incumbent Democrat will be hotly contested. The Democratic National Committee will have to spend money on races that were projected to be held with very low advertising and campaigning cost. The slimiest part of politics revolves around finding benefits in bad news, and this fits the bill to a tee. The summer vacation period has come to an end, and Republicans just got an early Christmas present.