America has entered treacherous waters with the failure of the auto industry bailout deal in the Senate last night. Think about how far we’ve sunk since September. Back then, we were experiencing a credit crunch, the effects of which were felt by only a small number of Americans at the time. Since then the $700 billion Treasury rescue plan seems to not have made much of a difference — although it is likely the situation would be worse if that legislation wasn’t passed. Also, since the crisis started the plight of ordinary people has gotten worse. New claims for unemployment are at the highest point in 26 years. That 1982 recession was ferocious, particularly in the industrial Midwest, and most experts say we’re in for 6 months or more of this.
In other recessions, such as the Bush Recession in 1992, observers failed to recognize things getting better early enough. I don’t get the sense that’s happening now.
President-Elect Obama’s opportunity is that he will take office at a real low point, from which things can only get better. Much of economic behavior involves psychology. If Obama the Orator can make Americans feel better, maybe things we’ll improve. So we can hope.