Strictly speaking a recession is defined by economists as two consecutive quarters of declining GDP (or negative growth). So by definition, the United States has yet to enter a recession, technically it has yet to even enter the first quarter of a recession. However, the numbers tell a different story.
The average consumer is experiencing a substantial rise in commidity prices due to inflation. And this inflation has extended beyond luxury commidities to items like gas, food, and medicine. Coupled with stagnated pay (when 85,000 people have lost jobs in 2008 alone, it would be foolish to expect a salary raise), this inflation creates a significant problem for low to middle class consumers. The practical side of this can be seen in the dramatic decrease in spending for the average American. (CNN)
And interestinly enough, this idea of inflation spurring a lack of spending can cause a cyclical pattern, entrapping our economy in borderline recession. A rise in prices in the food and oil industries cripple spending not just in those economic realms, but in luxury goods as well. Because the average American is spending more money on gas, they are spending less money on games, large cars, and traveling. This in turn continues to cripple any possible economic growth as a result of increased consumer spending. Hence the advice that Americans continue to spend even while in a recession.
The housing market is another large part of our current virtual recession. Because the economy is doing so poorly and inflation is on the rise, less families are purchasing homes. This leads to a decrease in value for houses currently on the market because there is less of a demand. And the decrease in value leads to an increase in foreclosures. Basically, home owners go into debt like this; they originally take out a loan for lets say 75% of the total price of the house. However in the current housing market, that original value has dropped by 30%, making that original loan now more than the actual value of the house. So if a person in this situation was forced to sell their home, they would owe the bank money even after the sale. As Frankly My Dear says, this whole idea of sub-prime loans is a "fall-out" from "the burst of the housing U.S. market" in 2006. Unfortunately, the dramatic decrease in house values that this fall-out created as perpetuated the problem two years later.
So what does our declining economy have to do with politics? Everything. This "recession" is not affecting the upper class. While their monthly bills may be tallying up to a higher dollar amount, they continue to drive Hummers and large SUVs without having to worry about the affordability of gas prices. Taking this into account, how much sense does the Republican trickle down theory have in our current situation? Tax breaks for the wealthy may spur spending in the upper crust of society, but eight years of this has obviously not led to a trickle down of wealth to the lower classes. If anything, it has only served to widen the gap between the rich and poor and we obviously need to approach this national problem from a different angle. The economy should be a major battleground in the presidential campaigns of both parties and I look forward to hearing some solutions and changes that will aid the average man of achieving the "American Dream".
